The law of trusts in British India

Page 2

Source page 2

Olnrn^ll ICam ^rl|nnl ICtbrary iiaraljaU lEquitg QloUcrttOtt (Sift of E.

Cornell University

Source page 3

Cornell University Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text.

ZsiQOve Xaw ILectuies— 188X

Source page 5

ZsiQOve Xaw ILectuies— 188X THE LAW OF TRUSTS IN BRITISH INDIA BY WILLIAM FISCHER AGNEW or Lincoln's inn. esq., baebistbr-at-law ; attthoe off " a treatise on THE law of patents " AND " A TREATISE ON THE STATUTE Off ffRAtlDS " SECOND EDITION REVISED AND EDITED BY M. KRISHNAMACHARIAR, M.A., M.L., PhD AUTHOR Off THE INDIAN EDITION Off TJNDBEHILL'S LAW Off TORTS, COMMENTARIES ON THE MADRAS ESTATES LAND ACT, LAW OF EASEMENTS IN BRITISH INDIA, A HISTORY Off CLASSICAL SANSKRIT LITERATURE, &C CALCUTTA & SIMLA TRACKER, SPINK & CO 1920

EDITOE'S NOTE.

Source page 7

At the time when these lectures were delivered by Mr. Agnew, the Law of Trusts in British India was no more than the law of England administered in the Indian territories. The Indian Trusts Bill was then on the anvil and in the year following it became -law. It was a statutory expression of the law of private trusts, but for reasons unknown, the Act has not been extended in its operation to the whole of British India. The Statutes of Elizabeth on Fraudulent Conveyances have been re- placed by the provisions of the Transfer of Property Act and that of Victoria on Insolvent Debtors by the Provincial and the Presidency-Towns Insolvency Acts. The Official Trustees' and Administrator-General's Acts have been revised and re-enacted.

principle of constructive trusts and in dealing with in-

Source page 8

▼1 EDITOB S NOTE. principle of constructive trusts and in dealing with in- stances oftliat nature, our Judges have never been slow to draw upon the treasures of the Courts of Equity in England. The law of Religious Endowments has developed a litera- ture ofits own, which, with its vast expanse, it is not now possible to embrace, save in an independent treatise.

TABLE OF CONTENTS.

Source page 9

Origin of Trusts ia England — Tenures — Feudal system — Sub-infeuda- tion — Estates of freehold — Alienation of estates — Gifts to religious houses — Mortmain — • Uses — • Statute of Uses — Object of Statute — Legal and equitable estates — Trusts among Hindus — Krishnaramini Dasi's case — Tagore case — Trusts for creditors — Family religioug trusts — Legislation in India — Arrangement of subject — Definition of trust — Must be confidence — Merger — Definition of terms — Kinds of trust — Simple trust — Special trust — Ministerial and discretionary trust — Mixture of trust and power — Lawful and unlawful trusts — Public and private trusts — Executed and executory trusts — Austen v. The Duke of Northumberland — Coape v. Arnold — Executory trusts in marriage articles and wills — Distinction between them — ^Marriage articles — Blackburn v. Duke of Northumberland — Will — Cy pres — Intention — General rules — Subject-matter of trust — Trusts against policy of law — Title of honor — Trusts of immoveable property without the jurisdiction of a Court — Penn v. Baltimore — Act V of 1908 — High Courts' Charter — Letters Patent — Suits for land — Foundation of jurisdiction — Court of Equity acts in per.ionam and not in rem — Land may be in a foreign country — Angus v. Johnston — Privity — Foundation of jurisdiction — Injunction restraining proceed- ing by other Courts — Trusts of moveable property abroad — Object must be lawful — General rule for ascertaining whether trust lawful — Indian Contract Act, s.

VIU TABLE OF CONTENTS.

Source page 10

Declaration o£ trust : Indian Trusts Act, ss. 5, 6 — Intention to create trust must be shown — Valuable consideration — Consideration not necessary — Transmutation of possession — Voluntary settlements — If incomplete, not enforced against settlor — If nothing more to be done by settlor, trust is complete — Assignment by cestui que trust — Notice — What amounts to a valid declaration of trust — Ineffectual assignment — Chose-in-action — Subsequent disclaimer by trustee — Settlor OEumot revoke voluntarily — Setting aside voluntary settlement — Defrauding creditors — To what property Statute applicable — Question of fraud is one of fact — Assignment by way of mortgage — Valuable consideration not support when mala fides — Sale to defeat Crown — Assignment in favour o^ one creditor — Voluntary settle- ments within Statute — Indebtedness of settlor — Secured debts — Consideration paid to third person — Voluntary settlement only void as against existing creditors ■— Unless fraud — How far settlement void — Defrauding purchaser — Statute does not extend to personal estate — When settlor may defeat settlement — Subsequent purchase must be for value — How far voluntary settlement defeated — Per- sonalty settled — Subsequent will — Conveyances with power of revocation — EfEect of Statute — Valuable consideration — Marriage — Extrinsic evidence admissible to show consideration — Settlement not set aside as against grantors — Voluntary settlement in expectation of death — Eectif jring settlement — Enforcement — On whom binding — Creditors' deeds how far revocable — Johns v. James — Execution of deed by creditors — Deed not communicated to creditors — Trust by will for payment of debts . . . . . . . . 47 LECTURE IIL Implied and Resulting Tkusts. Implied trusts — Precatory trusts — Objects, property, and trust must be described — Property acquired with notice of existing trust : Indian Trusts Act, s. 91 — Words of recommendation and entreaty — Inten- tion to give absolutely — Intermediate class of cases — Maintenance — - Agreement to settle property — Vendor trustee for vendee — Resulting trusts — Undisposed of interest : Indian.

TABLE OF CONTENTS. IX

Source page 11

IX PAdB. conveyance made — To rebut presumption as to part of the property — Statute of Frauds — Conveyance to stranger without consideration — Purchases in the name of a wife or child no resulting trust — Reputed wife — Person in loco parentis — Purchase by a mother — Purchase in name of nephew — Fiduciary relationship — Purchases void as against creditors — Bules apply to personal estate — Surrounding circum- stances tobe considered — Purchase-money unpaid — Joint tenancy when created — Purchase in the name of a child and a stranger — Evidence to rebut presumption of advancement — Subsequent acts and declarations — Possession by father ■— Dividends received by father — Devise, bequest, or lease — Child fully advanced . . Bbnami Transactions and Consteuotive Tbtjsts. Benami transactions — Purchase in name of child : Indian Trusts Act, ss. 81, 82 — Burden of proof — Strangers — Benami transactions among Mahomedans ■ — Assent of benamidar unnecessary — Disputing landlord's title — Suit by landlord against beneficial lessees — Strict proof required — Oral evidence — Proof of payment of purchase- money — Pleading benami transaction against purchaser under s. 66, Civil Procedure Code — Purchase at sale for arrears of revenue — Sale by benamidar — Standing by — Purchaser with notice — Real owner may sue benamidar — Equitable owner — Suit by benamidar — Suit ' by creditors against benamidar — Transaction avowedly fraudulent : Indian Trusts Act, s. 84 — Parties to suit : Indian Trusts Act, s.

TABLE OF CONTENTS.

Source page 12

Pa8B. of certain offences — Grantee under sanad — Who may be a cestui que trust — The Government — Corporations — Aliens — Who may be a trustee — Persons under disability — Aliens — The Sovereign — Not the Government of India — Corporation — Presidency banks — Married women — Insolvent — Gestuis que trustent — Relatives — Number of trustees — Disclaimer •— • How made — Gift to trustee or executor . . . . . . . . . . . . Duties and Liabilities oe Trustees. Duties and liabilities of trustee : Indian Trusts Act, s. 11 — • Trustee to acquaint himself with state of property : Indian Trusts Act, s. 12 — Trustee bound to protect trust-property : Indian Trusts Act, s. 13 — Getting in trust-estate — Estate outstanding on personal" security — When securities to be realized — Care required from trustee : Indian Trusts Act, s.

TABLE OF CONTENTS. XI

Source page 13

Duties and Liabilities of Trustees. Fage, Time within which sale of trust-property to be made — Discretion to be exercised : Indian Trusts Act, s. 22 — Conveyance of trust-property to cestuis que trustent — Distribution of the trust-fund — Derivative title — Payment after death of cestui que trust — ■ Appointment of trustee to assist in distributing — Presumption of death — Rebuttal of presumption — Release — Liability for payment to wrong persons — Costs — Interest — Bond of indemnity — Authority from cestui que trust to receive the money — Payment on written authority — Payment to persons under disability — Partners — Payment to single trustee — Over-payment : Indian Trusts Act, s. 32 — Refund to executor — Payment when debt from testator subsisting — Liability of trustee for breach of trust — Trustee liable though he has not benefited — Extent of liability — ■ Trustee about to abscond — Criminal breach of trust — Liability of professional adviser — Partner — Loss by accident — • Neglect to obey directions in instrument of trust — To pay pre- miums — Sale to purchaser for valuable consideration without notice — Agent — Barnes v. Addy — Limitation — Wilful default — Con- currence —Fraud by trustees — By cestui que trust — Acquiescence — Delay — Release and confirmation — No set-off in respect of breach of trust — Liability for breach of trust by predecessor or co-trustees — Trustee joining in receipt for conformity — Indian Trusts Act, s. 26 — Trustees giving receipt bound to see to investment — • Walker v.

xii TABLE OF CONTENTS.

Source page 14

Page. to settlement of accounts : Indian Trusts Act, a. 35 — General authority of trustee : Indian Trusts Act, s. 36 — Advice of cestui que trust — What acts trustee may do — Repairs — Winding up estate — Main- tenance — Compounding or releasing debts — How trust-property may be sold : Indian Trusts Act, s. 38 — Conditions of sale — Buying in — Power to convey : Indian Trusts Act, s. 39 — Power to vary investment : Indian Trusts Act, o. 40 — Power to apply property for maintenance : Indian Trusts Act, b.

TABLE OI CONTENTS. XHl

Source page 15

XHl Paqb. cestui que trust — Fiduciary relation dissolved — Burden of proof — Purchase by creditors — Assignee — Leave to bid — Purchase from infants — Legal representatives — Mortgagee — Lending to trustees . . Or THE RroHTS and Liabilities of the cestui que trttst. Right of cestui que trust to rents and profits : Indian Trusts Act, s. Lister — Right to call for conveyance — Costs — Indemnity — Right of cestui que trust to have trust carried out : Indian Trusts Act, H. 56 — Right of cestui que trust to hold property absolutely : Indian Trusts Act, s. 57 — Separate use — Right of cestui que trust to inspec- tion :Indian Trusts Act, s.

mixed with trustee's money — Partner trustee employing trust-funds

Source page 16

Page. mixed with trustee's money — Partner trustee employing trust-funds in business • — Election where trust-property to be sold or invested — Election by one cestui que trust to retain property unconverted — Notification of election — Liability of cestui que trust joining in breach of trust — Against whom interest of cestui que trust applied — Rights and liabilities of transferee from cestui que. trust .. .. Vacating the office of trustee : Indian Trusts Act, s. 71 — Discharge by cestuis que truslent — Discharge under power in instrument — Number of trustees — Trustee dying in lifetime of settlor — Payment into Court — Refusing or declining — Retiring — Last survivor — Cestui que trust may be appointed — Assignee or devisee of trustee becoming unfit or incapable — New trustee should be within jurisdiction — Trustee paid to retire — Breach of trust — Appointment must be completed — Stamp — Discharge by Court — Grounds of discharge — Whether retiring trustee must appoint successor — Procedure for discharge — Affidavits of fitness — Appointmeot where property lost — • Costs — Grounds for discharge — Discharge of representatives of trustee — Executor — Appointment of new trustees on death, etc. : Indian Trusts Act, o. 73 — Conveyance to new trustee — Survival of trust : Indian Trusts Act, s. 76 — Extinction of trust : Indian Trusts Act, s. 77 — Compulsory payment into Court — Nature of interest of plaintiff — Payment in of share — Payment after decree — Payment in of fund not received — Admission of receipt of money by trustee — Appointment of receiver — Necessary parties to a suit — Suits by or against strangers — Civil Procedure Code — Succession Act — Suits for specific performance — Representative specially constituted — Suits between trustees and cestuis que trustent — Representatives of deceased trustee — When trustee unnecessary party — Cestui que trust abroad — Suit for aliquot share — Suit between trustees — Executors and administrators — Suit by one cestui que trust on behalf of others — When allowable — Severing defence — Costs of severing — Costs — In suits between strangers and parties to trust — Between trustees and cestuis que trustent — Costs out of fund — Costs, charges, and expenses — Disclaimer — Costs after decree — ■ Suit necessary by act of trustee — Accounts — Law doubtful .. .. ..331 LECTURE XIL Reliqiofs and Chaeitable Trusts.

TABLE or CONTENTS. xv

Source page 17

Section 92 — 93 — Liability of trustees to account

TABLE or CONTENTS. xv Paob Religious purposes — Inhabitants of particular place — Improvement of particular place — Trust for particular classes of persons — Educa- tional purposes — Gift must be for the public — Must be certain Morioe v. Bishop of Durham — Instances of uncertainty — Principles of construing will — Cy pres — Altering scheme — Gift for charit- able purposes generally — Particular purpose failing, where gift is to charity generally — Particular charity not described — Failure of object where no intention to give to charity generally — Apportion- ment offund — Gift over — Charity in foreign country — Breach of trust — Mode of procedure to obtain redress — Civil Procedure Code, ss. 92-93 — Liability of trustees to account — New trustee — New trustees of society for maintaining religious ■\yorship — Memorandum of appointment — Vesting — Appointment of Official Trustee to charitable trust — Vesting property in trustees of charity — Visitors — Controlling revenues of charity — Subsequent gift — Purchaser without notice from purchaser with notice — Aliena- tion ofcharity estate — Religious trusts among Hindus — Perpetuities — Colourable gift to idol — Gift must be certain — Gifts to religious or charitable uses by Oudh taluqdars — Tenure in trustee Trust imperfect — Devise subject to trust — Sale of property subject to trust — Partition subject to trust — Alienation — Evidence of endow- ment tobe given — How far sale set aside — Trustee may not benefit by sale — Sale of turn of worship — Succession of trusteeship Enjoyment of endowed property — Turn of worship — Limitation Management vested in different persons — Proof of succession Succession where manager bound to celibacy — Reversion — Removal of trustee — Removal of mohunt — Religious trust irrevocable — Execution of trust — Principles to be followed — Right to erect place of worship — Religious trusts among Mahomedans — Elements of • wuqf — Creation of — Evidence of appropriation — Wnq^ to take effect after settlor s death — Requisites to valid wuqf — Undue influence Endowment subject to mortgage — Revocation — Alienation of vmqf property — Nominal endowment — Alienation subject to trust Mortgage by local custom — Lease of wuqf property — Transfer of trust — Purchaser from trustee — Breach of trust — Removal of trustee — Office of trustee — Female may be mutawalli — Succession to the office — Suits in respect of wuqf property . . . .

TABLE OF GASES.

Source page 18

Gulam Muhammad Valad Abu Sayid Khan v. 290 Adam's Trust, Be 286289 Abdul Gamie Kaaam v. Cox Hussen Miya Bahimtula 394, 395 Adlington v. Cann 32 Bengal 227 Abdul Ghafoor v. 399 Hughes Administrator-General of 229 Abdul Hasan v. Chowdhry Abdul Karim Adurmoni Devi V.

XVlll TABLE OP OASES

Source page 19

Advocate -General of Bombay Ambioa v. 37 Aga Mahomed Kumul Teh- Amritolal v. 194 nath 85, 196 Agia Bank, Ex parte . Narayan 290, 291, 390 109 Guravayya Annaaami v. Bambaran 104 Anund Moyee Chowdlirain V. Skinner 66, 70, 113, 112 Bykant Nath Roy .

. 379 ■— • V.V. DoyleyDixie 144, 373

Source page 20

Browne's Hospital 374 Indraswamee . . . Blackwell ration ofLiveipool 229, 294 . DoyleyDixie 144, 373 Chxirn Chatterjee . Wood 84, 361 Chesterfield 220, 246 . Earl of kath 85, 197 Atimannea&a v Abdul Ea^tlake . 227 Archbishop of York 17, 248 229,373 .

V. Wanen

Source page 21

Murray 249, 250, 268 and Regius, Profes- .

Barry, V.Ex Barryparte

Source page 22

Purushot- Barker v. lUingworth 249, 293 Barling v. 59 tam Dyal . . .97, 100 Bai Motivahu v. Addy 110, 135, 188, 192, Bainbridge v. 284 Barry, V.Ex Barryparte Baldwin v. North Stafford- Balkan Fund British Red shire Railway Company . Kishen Chunder 380 382 153, 186 Bamanji Manikji v.

xxn TABLE OF CASES Page,

Source page 23

Section 79 — Beddoe, Re 182, 218, 275 165, 167, 175

79- Beddoe, Re 182, 218, 275 165, 167, 175. . 157, 237 Bedaon's Trusts, Be Beecher v. Kedaii 56, 57, 61, 69 49 386, 388, Bajandar .... Bhagwan- Mariano Dos Angos . das .... 117 Bellamy and the Metropolitan Bhaskar v. 87 North Canara . . .197 54,8087 Bellasis' Trusts, Re Bhawani i>.

Blundell, Re . 221

Source page 24

Sheikh Lai 38C Blewett V, Millett . 111 393, 398 263, 266 Bloyea' Trust, Re , Blundell, Re . Cureton 65, 69, 71 18 Blunt's Trusts, Re Billingly v. 42 222, 210241 Bindasoondree Dassee v. 222 Bonfield « Hasaell 44,51 Birch V. Hookmore 76, 289 216, 250 Birchall, Re .

Bowman v. Hill . 220 Broadbent v. Varley . . 283

Source page 25

Braokenbury Lukheymoney . . .117 17,45 Bradby v. 157, 158 Bramamayi Dasi Jogea Broughton v. Broughton 251, 252 Chandra Dutt . . De Tastet 250, 258, 259 ;Breeeh Loading Co., Re Breedon v. 118, 119, 120 Browne's Will, Re Bridgman v. 112 310, 246 Brown's Trust, In re Bridyo Gauranga Satru V.

Budree Das v. Chooni Lai 1 10, 369 Page.

Source page 26

43, 280 Mohun . . . .384 Carmichael v. 251 Carter and Kenderdine, Re 65, 217 Burgess v. 109, 249 of Maaulipatam 160, 262, 317 Burtoo Sing v. Butler . .187, 222 149 Chalender and Herington, Re Buttanshaw v.

TABLE OF CASES

Source page 27

Young . . .261 Chapman, Re 142, 143, 144, Jamui . . . Marriboyina Chowdhry Herasutoottah v. 140,249 Christchurch Inolosure Act, Re 18 Charles v. Courtenay 90, 92 Bahadur . . . .61 6 Chudleigh's case . Kristo 95,97 Rani Chertsey Market, Re . Rolfe 227, 232 Chundramoney Dossee v.

TABLE OF CASES

Source page 28

Edmondson 85, 111, 120 British South Africa Co. The Loid Provost Commissioners of Charitable of Edinburgh Donations v. 289 365 Clergy Orphan Corporation, Be 374 V. 286 Clissold's Settlement, Se 142, 164, Clough V. Bond Congregational Church, 203, 241 Smethwiok, Re . . . Sewell 35 Cookes settlement, In re .

Costabidie v. Costabidie 80, 156

Source page 29

Costabidie 80, 156 Crunden and Meux's Con- Costa Rioa Railway Co. v. tract, Be . . . . 256, 260, 263 Cubishley'a Trusts, iJe . . Duke Cunningham and Frayling, Re 245 of Newcastle ... Nind 35770 5676 Couturier, Re Cowair v. Craddock 44 Dale, Re . . . .135 138 Crawford v.

V. Hutchings . 180 153, 177, 154

Source page 30

De Bonnes - tal 366 Davia Hannen v. Metropolitan and Davia's Trusts . . .135 DaviaoD, Be . . .211 Provincial Bank . . Jivraj Ratansi 29887 De Viame, Re . . .90 Deacon v. 94,97 Delaoour, In the goods of 124 Delane v. 178 Dhonender Chunder Mookerjee Delhi and London Bank v. 369,386,389 Nawab Syed Aahgur Ally Khan ....

XXX TABLE OF CASES

Source page 31

291 Douglas & Powell's Contract, Dibbsv. Teaadale . .191 Dover, Be . . . .126 Diokaon o. Scott . . .199 Downings' Residuary Estate , Be 78 Dimsdale v. Burford . . .126 Syud Keramut Ali 392, 397, 400 Dixon V. 365 257, 259, 260, 271, 320, 349 V. 393, 396, 400 Du Bochet, Be . . .34 d.

Ellison's Trusts, Be

Source page 32

86 Dunn, Re Ebsworth and Tidys' Contract, V. 181 Eoolesiastioal Commissioners Dunnage i. 109 Banoda Persaud 358, 363, 377 Blkinf V. Musohamp 29 67, 69 Ellison's Trusts, Be Earl of Kildare v. 32 Emma Silver Mining Earl of Portsmouth v. Croysdill Eastern Counties Railway 109 Co. ti.

Fakir Shai v. Chandmoni . 105 V. Fletcher 61, 55, 70, 293

Source page 33

191 Exhall Coal Co, Re 220 Pinlay v. Attorney-General 45, 46, 365 Pitch V. Fletcher 61, 55, 70, 293 Pakirudin v. Ross 234, 23676 164, 31874 Pazal V. Fenwick 111 Ford and Hill, Re Fegredo v. 48,88 Feofiees of Heriot's Hospital t>.

Forahaw v. Higginson 226, 228 G

Source page 34

83, 84, 89, 90 Upendra Mohan Tagore . 132 Free Church of Scotland Garrard v. 227 Freeman's Settlement, Be Fremen, Re . . 59,64 Gasquoine, Re 207, 216, 229, 245 V. Sudevi Mala 386 Freshfield Trust, Re . Cartland 135, 169, 303, Geaves, Re . . . .

V. Teja . 97 Gokul Nath v. Issur

Source page 35

Issur 380 76, 361, 363 Ghulam Husaain v. Jeyes 114, 265, 268 Bombay . . . .236 !- V. Coulfield . . .159 Giles, Re . . . . 141, 215 Gill V, The Attorney- General Gillett V. Hewer , 90 Kunwar Singh . . • 375 . King Behari 109, 264126 48 Gobardhandaa v.

In the goods of . 124

Source page 36

Gregory 197, 267, 298 Dalmir . . . .100 Grenville Murray v. The Earl Gosaami Sri Gridharyi v. of Clarendon ... . Grey 88, 91, 92, 93 Goswami a. .Madhowdas . 124 Governors of Christ's Hos- pital, Ex parte . . . Birkenhead Rail- 185, 194, 241120 V. Groves , 45, 85, 86, 87150 267 Grange v.

XXXVl TABLE OP CASES

Source page 37

Nawab Ali Khan 130 257, 296 Hammond ». 285 Hampshire Land Co., Be Halt Rom v. 392,394 201, 203, 204 Hajee NoorooUah v. Puma 26 Halifax Joint Stock Banking 51 Chandra . Masterman tbority 130 362 Hardeo Bus v. Hallet, 22153 264, 296, 297, 318 264 271 Hardoon v.

Hatch V. Hatch 117, 121

Source page 38

399 Hossein 114, 260 142, 177 Hasanali v. Peters 43, 189, 222 105 Narain Roy Hobson V. Maddiok Hodges, In re 255 Henderson v, Molver Hoghton V.

KXXVIII TABLE OP CASES

Source page 39

Papera , 295 Howaith, Be Holdsworth, Ex parte . . 113 Holland, B? . . . .63 Howkina v. 272 Hughes, Ex parte 266, 296, 624 , Re . r V. Clapham . . .185 115, 116, 118, 120 Hull V. Secretary of State Hurly, Ex parte . 48 358, 359, 386, 387 Hurpurshad v.

Ishun Chunder j;.Biahu Sirdar 60 V. May 140

Source page 40

Ill dab'ad 226359 Jackson and Haden's Hutoheaon v. Rup Lai Con-17, 45, 83, 103, 107 Jadunath v. Srimati Premmoni 104 Ibbetson, Ex parte 284 Jaga Bandhu v. Srinath 109 23 Ideal Bedding Co. v. Ran jit Imperial Land Co. of Mar- 383 seilles, Re . . . ,260 386 Jagarnath v. Freaiaon 124, 125, 137, Ishun Chunder j;.Biahu Sirdar 60 V.

TABLE OF CASES

Source page 41

Prendergast ■W.Telford 318 Jarvis v. 30 218 Jatindra Mohan Tagore Johnston v. Rowlands 28677 Ganendra Mohan Tagore . Jeffreys 50, 51, 70 141, 195 -- J). Alliance Bank 56, 57, 62 Jervoise v. Josselyn Northumberland 45, 209, 242, 21, 22 Joy V.

TABLE OP CASES

Source page 42

Page' Jumoona Daseya Chowdhrani ' Kanye Dass Byragee v. Bama Soonderai Dassya gopal Ghose ... 56 Chowdhrani . . .151 Kapini Goundan v. 384 Kahandas, Inre . . .97 Kasim v. Doyal State . . . .104 Kristo Deb . . .106 Kattama Matohiar v. Nuseeruddin 359, 363 singa Tever . . .

xlii TABLE OP CASES

Source page 43

Khuggender Narain Chow- Koolayappa v. Balusami Koomar Doorganath Roy v. dliury V. 313, 48 53, 212 64, 267 379, 383, 384, 385 'Kidney v. Bepin Behari 317 53, 56, 222 386 V. Secretary of State Krishnaramani Dasi v. for India in Council . . 128 Ananda Krishna Bose 38, 375 Kiplin V.

265, 268, 29649 Lavender v. Blaokston . 66

Source page 44

TABLE OF OASES xliii Page, Langley v. 235159 Langmeade'a Trusts, Be LangstaflEe v. OUivant 165 Lacey, Ex parte 258, 263, 264, Latifunisaa v. Majidunissa 397 265, 268, 29649 Lavender v. Keahav Annaji 220112 94,99 272 Layton Policy, Be Laing'a Settlement, Be . Joy Kuvarboi 43 144, 163, Learoyd v.

xliv TABLE OF OASES

Source page 45

79 Life Association of Scotland Lord V. 155 225, 310 Lord and Fullerton, Re . 287 Lord Provost, etc., of Llewellin, Re . Attwood 198, 285 Lord Ranelagh's Will, Re . Bead 86,93 Lorenz's Settlement, Re . Praser 33 Local Agents of Zillah Hooghly Loveland, Re V.

V. Home . 115 V. Sadiq . , 48

Source page 46

Maulvi Wall 117 Maharanee Brojosoondery Mabbett, Be ... Kjishnan . .152 Maohet's Will, Be . . . 393, 394, 397 44, 59 Mahomed Buksh v.

xlvi TABLE OF CASES

Source page 47

Maung Lekhrani 60 Manohar Ganeah v. Browne 110, 165,188, Lowten 128 190, 192, 216, 222 Mayor of Coventry v. Douglas vocate-General ofBengal 362, Marler v.

MoPherson v. Watt . . 266 V, Fox . 361, 362

Source page 48

129, 131, 136, 355 Mioklethwaiie v. Midgley 161 190, 229, 246 M'Donell v. Bamji Joita 290, 282, 285 Mitta Kunth Audhioarry 387 Neeranjun Audhioarry Megaon v. 329 Mercer, Re . . .64 287, 362 Meredith ».

xlviii TABLE OF CASES

Source page 49

South Yorkshire Railway Company Mohan Lalji v. Anil 109 144 400 Moroney, Re 26061 Mohiuddin v. Sayiduddin Mohun Das3, In re Morret v. Mohunt 389 Kerpara Daaa Mohunt Rumun Daaa «. Morriaon 217, 220 Aahbul Daaa Morae v. 287 Motee Dossee v Modhoo 124, 137 Soodan .

TABLE OF CASES

Source page 50

Koolsum Khanum 392, 400 Muhammad Nasim v. Vinayak . .116 Misser . . . .151 Munshi Basiruddin v. Shah Kubeer- Murphy, In re . . .44 oo-deen Ahmud . . Musadee Mahomed Cazum Mahipat Singh . . . Gangapershad 94 Mahomed Shoostry . . Thukrain Sookraj Miissoorie Bank v.

Finance Company Allyof Aus- 184

Source page 51

Venkayamma 52, 55 Bootun Singh . . .313 Narasimulu v. Sinnasami- vaiyan . . . „ 101 Narayan v. Peal . .135, 309 Nasimuniasa v, Abdul Kadir . 57, 62 220,'246 National Trustees Company of 94, Australasia v. General N Finance Company Allyof Aus- 184 tralasia 370 Nabob Amiruddaula Muham- mad V. 173 Nether Stowey Vicarage, Narasaya v.

TABLE OF CASES u

Source page 52

Hunting 52, 73 Hallett . . . .284 New Fleming Spinning and Northen v. Norway . .137 New, Prance and Garrards v. 115 Hunting . . . .14 Nowab Azimut Ali Khan v. 290 309 Obhoy Churn Ghuttuok Nilam Tirupatiroyadu v. 106 Vinjamuri Lakshminara- Obhoy Churn Mookerjee V. samma .... 186 Punchanun Bose 95 Nimai Chand v.

^—— V. Young . . Ill Pattison v. Gilford

Source page 53

White Ormsby, Re 216, 249, 280 Orr V. 124, 143 Park Gate Wagon Co., Re j 278 . Secretary of 161 State . . . .386 V.

TABLE OF CASES

Source page 54

285 Phillip's Trusts, Be Peddamuthulaty v. Abdool Karim 393, 394,399 Peppercorn v. 124 Plumtres' Marriage — V, JrJiiiips . . 392 399, 400 Pope's Contract, In re . . Haji Musa Port Canning Co., Be 401 Porter, Be . . 2 64, 265, 267 Phenis' Tmsts, In re Phillipo V.

Uv TABLE OF OASES

Source page 55

Poornaohandra 313, 383 Purappa Vanalingam Cbetti v. Radha 387 Makanaud Kiahen . . . .106 26 Purmessur Ojha v. Ka- dambini Dasi Goolbee . . . .314 120 Pratt V. Munia Halwani 113,117 108 Preo Nath v. 71,73 Queen's College, Cambridge, Priestman v. 37, 38, 376 Prosona Coomar Ghose V.

TABLE OP CASES

Source page 56

274 MohunTagore . . .376 Rajbana v. Sham Das Day . . . .151 Chunder Mitter . . 108 Chunder Chowdhury . .151 Raghunath v. Madhusudan , 311 Raghunathaohari v. Kashinath Dasi 152 382, 383, 384 Rai Kishori v. Adinara- Rajah Muttu Ramalinga yana ....

Ivi TABLE OF OASES

Source page 57

Jogender Nath Baul . . .381 Eanchordas v. Parbatibai 360, 361of 263, 264, Eamsur v. Sri Sri Jin 265, 267, 268 296, 297 Eaneemoney v. 36 Thakur . . . .384 Eamkissen Pajoshee Maha- Ranga v. Hurrykissen Maha- patur . . . .116 Rangaohariar v. Kishen shitar 386, 390 Eangammal v.

TABLE OF CASES

Source page 58

Hood Rogeraon, Re , . • 46 Renga v, Gnanaprakasa 109 Rohee Lall v. Radcliffe Richards, Re 50, 213 Roaa V. Richardson 52,54 Rouohef oucauld v. SmaUwood 49, 87, 88, 197, 192 62,64 — V. Kidder singh 57, 85, 86, 88 The Collector of Mymen- 126, 186 167; 105 Ridgway v. Tunstall 197, 267 Roybould, Re Robertson v.

Iviii TABLE OP CASES

Source page 59

Iviii TABLE OP CASES Page. ieiL£ip Sarat Chunder v. Viscount Dossee 129, 131, 135, 136 Holmesdale 21 Sarkum Abu v Rahaman 385, 398 Sadappa v. Dhakubai 313 381, 386 221 Sadd, iJe Sathianama v. 105 130 State for India . of Satya Kumar v. 205, 206, 207, 209, 245 Saffron Walden Second Benefit Saul V. Kaji 398 277 380 Sahebzada Singh v.

— ^— «. Datta-

Source page 60

105 Secretary of State for India v. Holland . . .260 Seshadri Iyengar v. Seshayyangar 391 Seth Nemichand, Inre . . 246 Shah Gulam Rahumtulla Sahib Saiba Diwan Shiv Sheikh Ghulam v. Amarohand Shah Moheeooddeen Ahmed 379, 380 V. Goor . . .104 Nankoo Singh . . .316 Sheo Nath v.

k TABLE OF CASES

Source page 61

Thakur Dass 388,Page- 389 Sherratt v. 250, 254 Khan . . , 100,101 Shewen v. Shank^r . .58, 59 Subramanya Iyer . Ally 52,53 Buksh Shah . . .396 Sloman v. Marwood 286138 Sidney, Ee . ^ . .84 Smart, Ex parte 70 Siggera v. 71, 73 Smith, He .51, 153, 165, 247, 267 Sikher v.

Chunder Dutt . . 36, 38 V.Stafford . . 196

Source page 62

86, 89 Srimati Krishnaiamani Dosi v. Wray . . .131 Ananda Krishna Bose 10, 37 Soleeman v. Sreemutty Srimati Sukhimani Dasi v. Jaggat Soondree Dossee 375, Mahendranath Dutt . . 105 380, 381 Srimat Raja Yarlagada v. E'adhanath . .290 Soodheekeena Chowdrain v.

ixii TABLE OF OASES

Source page 63

Guy 123, 142, 143, 164, Persad Singh . . .317 195, 209 Suraparaju v. Mahomed Mustafa 191 Suryanaiayana v. Alagappa Swain, Re . . . .18 104 Subramanya v. 358 • V, Secretary Swinbanks, Ex parte . . 23 Coal Co 26 Sykes, Ee . . . .257 Suddasook v.

TABLE OF OASES Ixiii

Source page 64

Hughes . .17, 45, 83 Tempest, Ex parte . . Lord Camoys 17, 135, 158, 287 DroboMoyee . . .399 . Maho- 12, 289, med Ali Khan . . .399 Thaokersey v. 313, 314, 316 Xhakore Fatehsingh V. Koomar Thakur Share Bahadur Singh 130 Sham Kishoie Roy . Tancred's Settlement, Re 44, 715 Srinivasa Thathachariar 289, 291 Tandavaraya Mudali v.

TABLE OF OASES

Source page 65

Howe 32, 44, 357 Treepoora Soondery Dossee 53, 78, 79 V. 104 Trustee of the British Museum Timmis, Ee . . Hurrell . . .209 Tweedie and Miles, Ee 179 Towers v. African Tug Com- 39 pany . . . .194 Twopeny v. 257, 262 .18, 46 Tyler, Re Townley v.

TABLE OF OASES Ixv

Source page 66

Somasundaram 61 Uniaoke, Be . . . .123 Venkoba v. Vidyanidhi 381, 389 Union Bank of Manoliester, Villiers v. The Municipal Commissioners Viney v. Walker 124, 125, 127, Visvanathan v. Brahmanathan 137, 182 Vital Vishva Nath Prabhu v. 398 Bam Chandra Sadashiv Uvedale v.

Ixvi TABIE OF CASES

Source page 67

Symonds 143, 160, 164, 218, 219, 229, 254, 267, 293, 294 195,210,211,246 V. Walley 112 250, 257, 258 Wallia, Re . 357 Wells and Hopfcinson's Walters .v. Anderson 264, 267, 268, 297 217, 219 Whicker v. White 36243 Way's Trust, Re . . .55 Wazeruddin v. Deoki Nandan 58 Whiteley, Re Wale V.

V. Lord Bury

Source page 68

32 222 Wiloook's Settlement, Be 79 V. Greenhill 280, 285, 286 Wolmeishansen v. Stainton Williams, In re 12, 15, 46, 76, Wolstonholme, Be 3960 Wood V. 260 283 William Watson & Co., Wood's Ships Woodite Co, Be 113 79 Willis V.

Ixvui TABLE OF CASES

Source page 69

Harford 213, 217, 220 Yeap Cheah Worssam, Be 197, 267, 268 Gheng Neo 355 Wren v. 291 kenzie V.267, 295, 296 Mao- Wrightson, Be .

TABLE OF ACTS.

Source page 70

103 VII of 1849 255, 256 II of 1850 .. 405 — 409 13, 188 XX of 1863 14, 248, 368, 370 • . .

TABLE OF ACTS

Source page 71

377 98,37,49 , S.2 346 IX of 1871, s. 98, 100,'133, 134 XVIII of 1879 .. ..

TABLE OF ACTS

Source page 72

TABLE OF ACTS Isxi Page. II of 1882 a. 11 . . 140 s. 12 .. 140 ». 13 . . 159 s. 14 . . 155, 144 s. 15 . . 152 s. 16 . . B. 17 . . 156146 s. 18 . . «. 19 . . . 160 s. 20 . . . 167 8. 21 . . 186, . 167 . 173 s. 22 . . 194, 195, B. 23 . . 198 318, 328 a. 24 . . ». 25 . . . 199 s. 26 . . 199, 200, 204 B. 27 . . 210, 213211 a. 28 . . 8. 30 . . 214215 o. 31 . . s. 32 . . 223 s. 33 . . 222 s: 34 . . 224 3. 35 . . 225216 B. 36 . . B. 37 . . 229230231 H. 38 . . a. 39 . . s. 40 . . 232 s. 41 . . 36, 232 s. 42 . . 234228 B. 43 . . 237 8. 45 . . 248, 8. 46 . . 239240 B. 47 . . 246 8. 48 . . o. 49 . . 8. 50 . . 249256 s. 51 . . 8. 52 . . 263 B. 54 . . 271273 s. 55 . . 277 8. 56 . . 278 ». 57 . . s. 59.. 288293295 B. 61 . . s. 62 . . 8. 63 . . B. 64 . . 300

Ixxii TABLE OF ACTS

Source page 73

123 3.126 3.138 39155 354 VI of 1890 3. 0 373 3.40 372233 VIII of 1890 127116 s. 17(6) 14110066 V of 1908 , 15, 134 24 33.

TABLE OF ACTS

Source page 74

IX of 1908 10 2, s 13, 309 13, 191, 266, 309 s. 19 2563722S6167 III of 1913 I of 1916 233, XV of 1916 163283 XXI of 1917 33 of 1879 (Bengal) IX (Bombay) I of 1905 28715 (Madras) II of 1886 283 I of 1902 28333 I of 1914 (N. P.) Ill of 1899 283 (Punjab) II of 1903

LECTURE I.

Source page 76

Origin of Trusts in England — Tenures — Feudal system — Sub-inf eudation — Estates of freehold — Alienation of estates — Gifts to religious houses — Mortmain — Uses — Statute of Uses — Object of Statute — Ltgal and equitable estates — Trusts among Hindus — Krishnaramiui Dasi's case — Tagore case — Trusts for creditors — Family religious trusts — Legislation in India — Arrangement of subject — Definition of trust — Must be confidence — Merger • — Definition of terms - — Kinds of trust — Simple trust — Special trust — Ministerial and discretionary trust — Mixture of trust and power — Lawful and unlawful trusts — Public and private trusts — Executed and executory trusts — Austen v. The Duke of Northum- berland — Coape V. Arnold — Executory trusts in marriage articles and wills — Distinction between them — Marriage articles — Blackburn v. The Duke of Northumberland — Will —Cy pris — Intention — General Rules — Subject-matter of trust — Trusts against policy of law — Title of honor — Trusts of immoveable property without the jurisdiction of a Court — Penn v. Lord Baltimore — Act V of 1908, ss. 15, 16 — High Courts' Charter — Letters Patent — Suits for land — Foundation of juris- diction — Court of Equity acts in personam and not in rem — Land may be in a foreign country — Aiigus v.

the feudal system. The lands were held by the grantees from the

Source page 77

The lands were held by the grantees from the sovereign, upon condition that they should, when called system upon, perform certain military duties. The sovereign was considered to be the owner of the granted lands, and was called the lord paramount, while the services to be rendered were regarded as incident, or annexed to the ownership of the land ; in fact, the rent to be paid for it. (a) At first the interest of the grantee in the lands granted did not extend beyond his own life. In course of time it gradually improved in stability and acquired an hereditary character, so much so, that the grantee, considering himself as substantially the owner, began to imitate the example of his sovereign by carving out portions of his land, to be held of himself by some other person, on terms and conditions similar to those of the original grant. This dation ^"' method of creating estates in the granted land was termed sub-infeudation. This method of holding lands gave rise to the fundamental maxim, which still prevails as regards land in England, that all land belonging to any subject in the realm is holden of some superior, and either mediately or immediately of the sovereign. And as all lands were holden, they were called tenements ; the possessors, tenants ; and the manner of their possession, a tenure, (c) There is no such thing, according to the English law, as the absolute owner- ship of land.

without children the estate went to his collateral relations, and

Source page 78

3 without children the estate went to his collateral relations, and only escheated on the failure of all persons who could possibly claim through him. (a) All these estates were originally inalienable either during the life-time of the holder, unless with the consent of the lord, or by will. It would be foreign to the purpose of these lectures to trace the steps by which the right of alienation was acquired, but I will endeavour shortly to explain the means used for the transfer of an estate from one person to another. The freehold is said to be in him, and until it is taken out of him and given to some other, the land itself is regarded as in his custody or possession. A feoffment with livery of seisin, was the gift of an estate in the land, accompanied with livery ,^— that is, dehvery of the seisin or feudal possession. At the time of the gift, the nature of the estate to be taken by the person to whom it was given, or feoffee, was marked out or limited. (6) Before the reign of Henry VIII, a simple gift of lands to a man and his heirs, accompanied by livery of seisin, was all that was necessary to convey to that person an estate in fee-simple in the lands. In law, therefore, the person to whom a gift of lands was made and seisin delivered, was considered thenceforth to be the true owner of the lands(c), and his estate was known as the legal estate.

was deprived of the benefits he derived from escheats. Lands

Source page 79

I. was deprived of the benefits he derived from escheats. Lands belonging to such bodies were consequently said to be in ° ^'"' mortud manu, or in mortmain, because they produced none of the advantages to the feudal lords, which lands held by individuals did. In order to check conveyances to reUgious houses and corporations, various Statutes, called the Statutes of Mortmain were passed, prohibiting corporations from purchasing land, unless a license in mortmain was procured from the lord. In order to evade these Statutes, the following device was resorted to by the ecclesiastical bodies. The grant, instead of being made direct to- the religious house, was made to some person to the use of the religious house. The person to whose use he was seised, called by the law writers the cestui que use, had the beneficial pro- perty inthe lands, had a right to the profits, and a right to call upon the feoffee to convey the estate to him and to defend it against strangers.

Lee. I.] USES. 6

Source page 80

To redress this grievance, the writ of subpcena was devised, or rather adopted from the Common Law Courts, by the clerical Chancellors, to oblige the feoffee to attend in Court and disclose his trust ; and then the Court compelled him to execute it. This writ is said to have been first issued by John Waltham, Bishop of Salisbury, who was Lord Keeper in the reign of Richard the Second. " No sooner was this protection extended than half the lands in the kingdom became vested in feoffees to uses. Thus, in the words of an old counsellor, the parents of the trust were Fraud and Fear, and a Court of Conscience was the Nurse." (a) " The power assumed by the clerical Chancellors in controlling the maxims and principles of the Common Law, cannot be considered as short of legislative ; for not only, in virtue of a law created for private convenience and independent of the Common Law, was the person legally entitled deprived of all the beneficial incidents of property ; but a distinct title to the enjoyment was introduced, not only unknown to, but at first repudiated by, the law : the legal title indeed was not directly affected, yet the legal owner was compelled to exercise his legal rights, so as only to be subservient to the protection and enjoyment of this equitable interest : although by this means, as regarded the real owner of the estate, the legal rights of third persons, including the Crown, were defeated, which indeed was one of the palpable objects for which trusts were introduced. "(6) Uses were not considered as issuing out of or annexed to the land, as a rent, a condition or a right of common, but as a trust reposed in the feoffee, that he should dispose of the lands at the discretion of the cestui que use, permit him to receive the rents, and in all other respects have the beneficial property of the lands. Thus, between the feoffee and cestui qui use, there was a confidence in the person and privity in estate, (c) But this was only as between the feoffee and the cestui que use. To all other persons the feoffee was as much the real owner of the fee as if he did not hold it to the use of another. He performed the feudal duties, his wife was entitled to dower, his infant heir was in ward- ship to the lord, and upon attainder the estate was forfeited. (<i) The doctrine of uses, as regulated and settled by the Court of ■Chancery, was so applied that it became productive of serious grievances.

uses, by which the beneficial interest belonged to one person and

Source page 81

I. uses, by which the beneficial interest belonged to one person and the legal estate to another, (a) To remedy these inconveniences, the Statute of Uses (6) was passed by which the possession was divested out of the Statut f Uses. ' persons seised to the use, and transferred to the cestui que use. By this Statute it was enacted, that where any person or persons shall stand seised of any lands or other here- ditaments tothe use, confidence, or trust of any other person or persons, the persons that have any such use, confidence, or trust (by which was meant the persons beneficially entitled) shall be deemed in lawful seisin and possession of the same lands and hereditaments for such estates as they have in the use, trust, or confidence. Uses, therefore, in the modem acceptation of the word, are such limitations of lands and other hereditaments as are executed by the Statute and confer on the beneficial owner the legal estate ; and trusts are similar to what uses were at Common Law before the passing of the Statute. Uses, under the Statute, were subject to the jurisdiction of the Courts of Common Law, and trusts to that of the Courts of Chancery or Equity, (c) The object of this Statute was to aboUsh the jurisdiction of the Court of Chancery over landed estates by giving actual possession at law to every person beneficially entitled in SteUrte equity. For instance, suppose a feoffment had been made to A and his heirs, to the use of B and his heirs, to the use of G and his heirs,, the doctrine was, that the use to C and his heirs was a use upon a use, and was, therefore, not affected by the Statute of Uses, which could only execute or operate on the use to A and his heirs. So that whenever it is wished to vest a freehold estate in one person (o) See Watkins on Conveyancing, (6) 27 Hen.

as trustee for another, the conveyance is made unto the trustee or

Source page 82

7 as trustee for another, the conveyance is made unto the trustee or some other person and his heirs, to the use of the trustee and his heirs, in trust for the party intended to be benefited (called cestui que trust) and his heirs. An estate in fee-simple is thus vested in the trustee by force of the Statute of Uses, and the entire beneficial interest is given over to the cestui que trust by the Court of Chancery. The estate in fee-simple which is vested in the trustee is called the legal estate, being an estate to which the trustee is entitled only in the contemplation of a Court of Law, as distinguished from equity. The interest of the cestui que trust is called an equitable estate, being an estate to which he is entitled only in the ^^^al and contemplation of the Court of Chancery which administers estates. equity, (a) The cestui que trust is the beneficial owner of the property. The trustee, by virtue of his legal estate, has the right and power to receive the rents and profits ; but the cestui que trust is able, by virtue of his estate, in equity, at any time, to oblige his trustee to come to an account and hand over the whole of the proceeds. (6) The general idea of a use or trust answered more to the fdeicommissum than the usus fructus of the civil law, which latter was the temporary right of using a thing without having the ultimate property or fuU dominion of the substance ; but the fidei commissum, which usually was created by wiU, was the disposal of an inheritance to one, in confidence, that he should convey it, or dispose of the profits, at the will of another. The right of the latter was originally considered in the Roman law as jus precarium, — that is, one for which the remedy was only by entreaty or request ; but by subsequent institution, it acquired a different character, — it hecRme jus fiduciarium, and entitled to a remedy from a Court of Justice, and it was the business of a particular magistrate, the ■praetor fidei commissar ius, to enforce the observance of these confidences.

Eoman law, which were probably the origin of trusts in the English

Source page 83

Section 284 — " I think that for various reasons,

Eoman law, which were probably the origin of trusts in the English . law." In Sm. His Lordship said that there was not the least ground for suppos- ing that anything like the English law of trusts existed in Hindu law, — that is to say, a system according to which property subject to a trust has to be viewed under a double" aspect, — that of the trustee on the one hand, who is declared by law to be the absolute and uncontrolled owner ; and the cestui que trust on the other, who has a right in equity to interfere in the ownership and compel the trustee to abandon all or nearly all his rights in his (the cestui que trust's) favour. " There is not," continued his Lordship, " a trace of it in any passage of any work on Hindu law that I have seen. There is not an indication of it in the habits of the people, and so far from the English system of trusts resting on principles of jurisprudence, which, though dormant, may be considered as universally present, it is undoubtedly one of the most anomalous institutions in the whole history of law — one that could never have possibly been conceived d priori, or worked out £rom any general principle, and is distinctly the product of our own time." On appeal, however(6),- Peacock, C. There are many cases in which trusts have been enforced against Hindus both by the Courts in this country and by Her Majesty in Council upon appeal." Macphersdn, J., said in p. 284 :— " I think that for various reasons, — because there is nothing in Hindu law which is repugnant to, or inconsistent with, the idea of trusts, — ^because trusts are not unknown to the Hindu law, — and because trusts, as among Hindus, have been recognized and administered for the last century almost, by this Court and the late Supreme Coiui;,— we are bound so to recognize trusts and to give effect to them. I concede that trusts, in the strict sense in which an English lawyer uses the term, — that is to say, trusts, to the existence of which a ' legal ' estate and an ' equitable ' estate, wholly separate from and inde- pendent ofeach other, are necessary, were unknown to the old Hindu law.

should be anything corresponding to the two estates which are so

Source page 84

9 should be anything corresponding to the two estates which are so well known to the English law ; nevertheless, trusts, in the wider sense of the term, were by no means unknown in the tenets of Hindu law. I do not speak of the various personal ordinary trusts, such as deposits and bailments, which are expressly recognized and dealt with by all the writers on Hindu law. The existence of such trusts does not affect the present question, which relates solely to special trusts, where the person to whom property is given is bound to use it for the benefit of another, or to apply it in a parti- cular manner indicated, and not necessarily for his own advantage. It may be so in words ; but, by whatever name it is called, it is a mere setting apart of property which is to be held and used by the manager for the time being, whether he be a priest or whoever he may be, for the purpose, in the first instance, of providing for the worship of the idol, or of carrying out the religious or charitable objects of the original donor. But granting, for the sake of argument, that trusts are not expressly recognized by the old Hindu law, that is not, in my opinion, any reason why we should now conclude that they are invaUd. The general position of trusts in English law with these two absolutely separate estates, the legal and the equitable, may be somewhat anomalous.

been distinct from the Courts of Common Law, and equitable

Source page 85

I. been distinct from the Courts of Common Law, and equitable rights are kept wholly apart from legal. The peculiarity of the English law of trusts arises out of specialities of procedure. But questions of procedure cannot affect the question, whether trusts are to exist, or whether Courts are to give effect to them. I cannot see that the fact that this Court is a Court of Equity as well as of law, and that our procedure differs from that of the old Supreme Court, creates any difficulty in giving effect to, or administering, trusts, or in any way affects the question of substantive law as to whether trusts can or cannot be created." In Ganendra Mohan Tagore case ^'"^ore V. No doubt, in this country, where Courts of Justice are not distinguished hy their functions into Courts of Law and Courts of Equity, and where law and equity are administered by the same tribunal, there is no occasion for the creation and maintenance of an equitable estate in property as separate from the legal estate. Justice Markby intended to lay down in the two judgments to which I have been referred. (6) But I think that whether a man accepts property on the terms of giving another person a specified benefit out of it, or whether he undertakes to manage property on behalf of another, our Courts will, in both cases alike, know how to make him discharge the obligation under (a) 4 B.

Lee. I.] TAGOEE CASE. 11

Source page 86

11 which he comes ; and I do not hesitate to believe that it is in entire accordance with the genius of the Hindu law that the^ should do so. " Although our Courts know nothing of a legal title as dis- tinguished from an equitable title, they can, I apprehend, easily understand the predicament of property placed under the dominion and control of one person, in order that he may deal with and manage it for special purposes involving the benefit of others. In few words, the non-existence of the English equitable estate does not necessitate the non-recognition of a trust. Except, perhaps,, in the very rudest state of civilization, trust-ownerships will, most certainly, spring into being, and the interests of society require that, within certain limits at least, effect should be given to those by Courts of Justice." On appeal. J., referring to his; judgment in Kumara Asima Krishna Deb v. All that I laid down in the case of Asima Krishna Deb v. Implied trusts were recognized and established here in the case of a benami purchase in Gopee Krist Gosain v.

r^ious support of a family idol and for the erection of temples

Source page 87

I. this point was to bring distinctly under the notice of their Lordships the contention that, under the guise of an unnecessary trust of inheritance, the testator could not indirectly create beneficiary estates of a character unauthorized by law, and which could not directly be given without the intervention of the trust, their Lord- ships adopt the argument upon the ground that a man cannot be allowed to do by indirect means what is forbidden to be done directly, and that the trusts can only be sustained to the extent and for the purpose of giving effect to those beneficiary interests which the law recognizes, and that, after the determination of those interests, the beneficial interest in the residue of the property remains in the person who, but for the will, would be lawfully entitled thereto. Subject to this qualification, their Lordships are of opinion that the objection fails." Trusts for the benefit of creditors are recognized here as Trusts for divesting the owner of the property conveyed of any <;reditors. interest therein which can be the subject of execution until the trusts have been carried out(a), and there are many instances of family religious trusts (6) such as trusts for the r^ious support of a family idol and for the erection of temples trusts. and bathing ghats, (c) And a trustee who misappropriates trust-funds may be compelled to compensate the cestui que trust{d). These cases show clearly that there is such a law as the law of trusts existing in this country, and it is difficult to imagine a state of civilization in- which some system of trusts should not exist. Without such a system it would be impossible to provide for persons under disability, such as infants and lunatics. It would be impossible to provide for religious or charitable purposes, and for the many instances in which one person obtains control over the property of another, without, perhaps, actual force or fraud, but under circumstances which make it inequitable that he should retain such control. In this course of lectures, I shall confine myself to those principles of the law of trusts which must be applied equally to all cases in which a person, whether governed by English, Hindu, or Muhammadan law, is bound to apply (a) Bamanji Manikji v.

property over which he has control for the benefit of some other.

Source page 88

13 property over which he has control for the benefit of some other. With those portions of the law of trusts which are founded upon the distinction between legal and equitable estates, or upon English Statutes, I shall not attempt to deal, such, for instance, as questions relating to the legal estate taken by the trustee, the devise of trust- estates, and escheat. Nor shall I attempt to deal with the class of cases relating to powers under settlements, the duties of trustees for renewal of leases, and other similar branches of the law which are seldom applied in, this country. Although trusts are fully recognized in this country, there was for a long time very little legislation with regard to them. The Penal Code(a) contained(6) provisions for the fnfnd^a**" punishment of criminal breach of trust ; the Specific Relief Act(c) defined((i) ' trust ' and ' trustee,' and provided(e) that a trustee may sue for the possession of property to the beneficial interest in which the person for whom he is trustee is entitled ; the Civil Procedure Code(/) contained provisions (5") for the conduct of suits by and against trustees, executors, and administrators, and provisions(A) as to suits relating to public charities ; the Limitation Act(ii) provided(y) that no suit against an express trustee or his legal representatives or assigns shall be barred by any length of time, and contained provisions (A;) for the limitation of suits to make good loss caused by the breach of trust of a person deceased, for contribution against the estate of a person deceased, against the purchaser of moveable property from a trustee, and against the purchaser of land from a trustee. The Indian Trusts Act territories to which this Act for the time (1882), repeals the Statute.

14 ARRANGEMENT OF SUBJECT.

Source page 89

14 ARRANGEMENT OF SUBJECT. [Lec I. provisions of Acts XXVII and XXVIII of 1866, the Trustee Relief Acts, had been applied only in cases where the parties were European British subjects, as the Acts themselves state that they shall only be extended to cases to which English law is applicable, though it was some years later decided in Bombay, by West, J., in the case of In re Kahandas Narrandas{a), that these provisions were applicable between Hindus. The object of the proceedings was to obtain the appointment of a new trustee to a charity under s. It was admitted that this could be done by the more expensive process of a regular suit, and it was contended that the expression " cases to which English law is applicable " applies to all cases in which the princi- ples ofEnglish law have to be referred to, and that as the adminis- tration oftrusts in this country is governed by the rules of the English Courts of Chancery, the Act applied to the law to be followed, not merely to cases where the parties are English. West, J., granted the application, considering that English law was applicable if the principles recognized by the English Equity Courts were ap- plicable. It saved the rules subject. of Mahomedan law as to wicqf, and it left untouched religious and charitable endowments established by Hindus and Buddhists as being matters in which the Legislature could not usefully interfere further or otherwise than has been done by Act XX of 1863. This bill became law in 1882, under the title, the Indian Trusts Act.(c) I think, that my best course in arranging the subject of these Lectures is to follow the plan upon which the bill is framed.

and liabilities of the cestui que trust ; vacating the office of

Source page 90

15 and liabilities of the cestui que trust ; vacating the office of trustee ; and the extinction of trusts. I shall also consider the subject of religious and charitable trusts among European British subjects, which is not dealt with by the Act. A trust may be defined as an obligation imposed upon some person or persons having the ownership of property, whether moveable or immoveable, to deal with such pro- Definition perty for the benefit of some other person or persons, or for charitable purposes. Lewin adopts Lord Coke's definition of a use, the term by which, before the Statute of Uses, a trust of lands was designated, and defines a trust to be "a confidence reposed in some other, not issuing out of the land, but as a thing collateral, annexed in privity to the estate of the land, and to the person touching the land, for which cestui que trust has no remedy but by suhpcena in Chancery." But this definition is limited to trusts of lands only, whereas trusts may be declared of almost every kind of property. The Indian Trusts Act defines a trust as ' ' an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner "(a). It is not necessary that the confidence should be expressly reposed by the author of the trust in the trustee, for it may be raised confidence. by implication of law, as in the case of a constructive trust which is raised by a Court of Equity " whenever a person clothed with a fiduciary character, gains some personal advantage by availing himself of his situation as trustee ; for, as it is impossible that a trustee should be allowed to make a profit by his office, it follows, that so soon as the advantage in question is shown to have been acquired through the medium of a trust, the trustee, however a legal title he may have, will be decreed in equity to hold for good the benefit of his cestui que trust "(6) : as for example, when a trustee or executor renews a lease in his own name, — or where a factor, partner or other person in whom confidence is reposed, agent, advantage of such confidence to acqttire a pecuniary benefit takes for himself, — in such cases he will be made' to account to the person interest he was bound to act, and will have to refund in whose may have made, or make good any loss caused any profits he 1882, s.

" Further, the trustee of the estate need not be actually

Source page 91

These cases I shall deal with at greater length hereafter. " Further, the trustee of the estate need not be actually capable of confidence, for the capacity itself may be supplied by legal fiction, as where the administration of the trust is committed to a body corporate ; but a trust is a confidence, as distinguished from jus in re and jus ad rem, for it is neither a legal property nor a legal right to property, " A trust is a confidence reposed in some other ; not in some other than the author of the trust, for a man may convert himself into a trustee, but in some other than the cestui que trust ; for, as a man cannot issue a subpoena against himself, he cannot be said to hold upon trust for himself ; and if the legal and equitable interests happen to meet in the same person, the equitable is for ever absorbed in the legal "(a) ; or, in other words, where the legal and equitable interests are co-extensive and vested in the same person, ^'^^^^- the equitable merges in the legal interest. (6) The person who reposes the confidence is called the author . oj the trust ; the person who accepts the confidence is of^terms" called the trustee ; the person for whose benefit the con- fidence isreposed and accepted is called the cestui que trust, or beneficiary; the subject-matter of the trust is called trust- jyTo-perty or trust-money ; and the instrument, if any, by which the trust is declared, is called the instrument of trust(c). Having ascertained what is meant by a trust generally, I now propose to consider the different kinds of trusts. The Kinds of trust. most important division of trusts is into ' simple ' and ' special ' trusts. " The simple trust," says Mr. J is vested in one person upon trust for another, and the ^^ '^"^ ■ nature of the trust, not being prescribed by the settlor, is left to the construction of law. In this case cestui que trust has jus habendi, or the right to be put in actual possession of the pro- perty, and jus disponendi, or the right to call upon the trustee to execute conveyances of the legal estate as the cestui que trust directs." " The special trust is where the machinery of a trustee is introduced for the execution of some purpose particularly pecial trust, pointed out, and the trustee is not, as before, a mere passive depositary of the estate, but is called upon to exert (a) Lewin, 12th Ed., 12. (c) Indian Trusta Act, s.

Lee. IJ KINDS OP TRUSTS.

Source page 92

IJ KINDS OP TRUSTS. himself actively in the exeeutioi of the settlor's intention ; as where a conveyance is to trustees upon trust to sell for pav- of debts." ^ '' tnent " Special trusts have again been sub-divided into ministerial (or mstrumental) and discretionary. tionaryMinisterial The former, such as demand no further exercise of reason or understanding and discre- than every intelligent agent must trust. necessarily employ; the latter, such as cannot be duly administered without the application of a certain degree of prudence and ment." " A trust to convey an estate must be regarded as ministerialjuiig-; for, provided the estate be vested in the cestui que trust, it is perfectly immaterial to him by whom the conveyance is executed." " A fund vested in trustees upon trust to distribute among such charitable objects as the trustees shall think fi.t(a), is clearly a, discretionary trust, for the selection of the most deserving objects is a matter calling for serious deliberation, and not to be determined upon without due regard to the merits of the. candidates,^ and all the particular circumstances of the case." " There is frequent mention in the books of a mixture of trust and power(&), by which is meant, a trust of which the trust and outline only is sketched by the settlor, while the details Mixture of are to be filled up by the good sense of the trustees. The exercise of such a power is imperative, while the mode power. of its execution is matter of judgment and discretion." Trusts may also be divided into lawful and unlawful, What trusts are unlawful I shall consider more fully when dealing Lawful with the'creation of trusts. It is sufficient to state now that and ful trusts.unlaw- all lawful trusts may be enforced by a Court of Equity ; and, as a rule, it may be laid down that a trust is lawful until the contrary is shown. Where a trust is unlawful and fraudulent, a Court of Equity will remain neutral, and will neither enforce the trust, nor relieve the person creating it(c), unless the illegal purpose fails, to take effect, (d!).. M. & G., 643 ; PMUpots v. (a) Attorney-General V. Lamb., Amb., 309 ; Phillpots, 110 C.

trusts. cestui que trust, leaving nothing to the discretion

Source page 93

18 PUBLIC AND PRIVATE TRUSTS. [LeC. Again, trusts may be divided into public and private. Trusts for public purposes are such as are constituted for the Public and benefit either of the public at large or of some considerable truste.^ portion of it answering a particular description. Unlike private trusts they are of a permanent and indefinite character and not confined to any certain limits prescribed in a settlement, (a) All charitable trusts come under the description of public trusts.(&) " Public purposes," said Lord Eomilly, M. Executed Where the trust is complete in itself, — that is to say, when andexe- the author of the trust has formally and finally declared cutory what interest in the trust-property is to be taken by the trusts. cestui que trust, leaving nothing to the discretion of the trustee, the trust is said to be an executed trust. But where direc- tions are given for the execution of some future conveyance or settle- ment oftrust-property, and the particular limitations are not fully or accurately specified, and the trust is, therefore, not complete in itself, but merely contains heads or minutes for the disposition of property which are to be carried into efEect in a more formal manner according to the intention to be collected from the instru- ment, the trust is said to be executory, (c) The distinction be- tween trusts executed and executory was questioned by Lord Hardwicke in Bagshaw v.

established as one of the settled rules of the Court of Chancery.

Source page 94

19 established as one of the settled rules of the Court of Chancery. Voice{b), describes an executory trust to be, where the party must come to the Court (the Court of Chancery) to have the benefit of the will. But that is the case of every trust, and I am very clear that this Court cannot make a different construction on the limitation of trust than Courts of Law could make on a limitation in a will, for in both cases the intention shall take place. . . . The true criterion is this : whenever the assistance of the trustees, which is ultimately the assistance, of this Court, is necessary to complete a limitation, in that case, the limitation in the will not being complete, that is sufficient evidence of the testator's intention that the Court should model the limitation. But where the trusts and limitations are already expressly declared, the Court has no authority to interfere and make them different from what they would be at law." And in Jervoise v. The Duke ' where the testator has directed something to be done, and of North- has not himself, according to the sense in which the Court u^i^edand. uses these words, completed the devise in question, the Court has been in the habit of looking to see what was his intention ; and if what he has done amounts to an imperfection, the Court inquires what it is itself to do, and it will mould what remains to be done so as to carry that intention into execution, "(c?) In Coa/pe ^ V.

Mticles and jj^ ^jj,g articles ; or where a testator intends that

Source page 95

The cases in which executory trusts usually arise are where Executory articles are entered into previous to a marriage, the parties trusts in intending that a more formal document shall be drawn up marriage afterwards to carry out the provisions which are indicated Mticles and jj^ ^jj,g articles ; or where a testator intends that his property shall be settled in a particular way upon certain persons, but does not in his will state precisely the nature of the estate which he wishes to devise. A material distinction has been recognized in equity between Distinction ^^ executory trust founded on marriage articles, and one between voluntarily created, as by will. Therefore, unless the contrary clearly appear, equity presumes that it could not have been the intention of the parties to put it in the power of the parent to defeat the object of the settlement by appropriating the whole estate ; and on this presumption the articles will usually be decreed to be executed by limitations in strict settle- v.ltabks" '^ent. E., said :— " I know of no difference between an executory trust in marriage articles and in a will, except that the object and purpose of the former furnish an indication of intention which must be wanting in the latter. A testator gives arbi- trarily what estate he thinks fit. The subject being mere bounty, the intended extent of that bounty can be known only from the words in which it is given ; but if it is to be clearly ascertained from anything in the will, that the testator did not mean to use the expressions which he has employed in their strict, proper, technical sense, the Court, in decreeing such settlement as he has directed, will depart from his words in order to execute his intention ; but the Court must necessarily follow his words, unless he has himself shown that he did not mean to use them in their proper sense ; (a) 2 V. & B., 369.

Lee. I.] WILL. 21

Source page 96

21 and courts have never said that merely because the direction was ior an entail, they would execute that by decreeing a strict settle- ment." And in Jervoise v. The Duke of Northumberland{a), Lord Eldon said :— " In marriage articles, the object of such settlement, the issue to be provided for, the intention to provide for such x^ j^ issue, and, in short, all the considerations that belong The Duke" peculiarly to them, afford prima facie evidence of intent, of North- which does not belong to executory trusts under wills. I take it according to all the decisions, allowing for that an executory trust in a will is to be executed in the same way."(&) In the case of a will, the Court endeavours to carry out the intentions of the testator as apparent on the will, and is not necessarily ^.., bound to give technical words their strict signification ; and if, therefore, the directions of the testator as to the disposition of the trust-estate show that he could not have intended the ex- pressions tohave their strict technical operation, the Court, in decreeing a settlement, will depart from the words in order to execute the intent, (c) Where a testator directs his trustees to settle or convey an estate without more, the Court is obliged to interfere and to point out the estate to be taken by the cestui que trust. But if a testator merely directs the purchase of an estate by his trustees, and himself declares the uses of the estate when purchased, the Court has no power to alter or modify his words ((?) ; it is only when something is left incomplete and executory by the author of the trust, that a Court of Equity will mould or modify the words in order to give effect to the intentions of the party. For, if the limitations of the trust-estate are definitely and finally declared by the instrument itself, that will be an executed trust, and it must be carried into execution as strictly and literally as if it were a limitation of the legal interest, (e) If the executory trust, which the testator has attempted to create, is one which is void for illegality, as where it violates the rule against perpetuities, the Court will carry ^^ ^''^• out the testator's intention cy pres, that is, as nearly as possible, and will direct the property to be strictly settled. (/) We have seen that the Court will endeavour to carry out the intentions of the author of the trust, and in so doing is not bound to give their strict meaning to technical i^t^ntion. (a) 1 Jac. & W., 574. berland, 1 Jao. & W., 570 ; Bale (6) See Sackville West v. Wms., 142 : 2 Jlolmesdale,li.'R.,4:'E.

22 GENERAL RULES. [LeC. I.

Source page 97

I. expressions which may be used in the instrument creating the trust. Upon this principle of carrying the intentions of the testator into effect, the Court will endeavour to construe expressions which have no strict technical operation, and this whether the instrument of trust be a deed or will, (a) But the expressions used must be directory and certain ; mere precatory expressions, or words of recommendation, will not be enforced. (6) In conclusion of this subject, it may be stated generally for the guidance of trustees, that where an executory trust rule?^ arises on marriage articles, whose object is to provide for the husband and wife, and their issue, the trustees will be justified in executing the trust by limiting the estate in strict settlement, although it would certainly be the more prudent course for them to obtain a declaration of the Court for their guidance even in these cases. But where the trust is created by will, and the testator has not himself distinctly and accurately specified the limitations which are to be inserted, trustees could seldom or ever be advised to take upon themselves the responsibility of putting a construction on the direction of the testator by the execution of any particular settlement ; this can be done with safety only under the sanc- tion ofthe Court. And the same remark applies to executory trusts created by any voluntary deed or instrument operating inter vivos. If a husband have entered into articles on his marriage, binding himself to make a particular provision for his wife and children, it will not be competent for the trustees of their own authority to accept any other provision in lieu of that contemplated by the articles ; although they will be justified in instituting a suit for the purpose of bringing the propriety of such a substitution before the Court, (c) The next point to consider after defining the different kinds of trusts, is, the property which may be made the subject of a trust. As a general rule it may be laid down, that every kind of (a) Woolmore v.

property, whether moveable or immoveable, which may be legally

Source page 98

23 property, whether moveable or immoveable, which may be legally transferred or disposed of(a), may be the subject of a trust, but it must not be a merely beneficial interest Subject- under a subsisting trust. (6) It is not necessary in England trust^"^ that the person creating the trust should have the legal estate, — that is to say, should be the absolute owner, for the equitable owner of property, or the person having the beneficial interest, may create a trust of such beneficial interest, (c) But the limitation against trusts of beneficial interests has been adopted in India to avoid complications that might arise by allowing a trust upon a trust. («i) A trust may be created of property which is not in the actual possession of the author of the trust, such as property to which he will become entitled on the death of a third person, (e) But a mere expectancy, in the nature of a naked possibility, cannot be the subject of any dealing. (/) A reversioner, presumptively entitled to the estate held by a Hindu widow, cannot create any valid interest in his possible inheritance, (gi) In Green v. Folgham(h), the sole possessor of a recipe for making a medicine assigned it, on the marriage of his daughter, to trustees, upon trust for her and her husband for their lives ; and directed that, after their decease, it should be sold for the benefit of their children. The mother destroyed the recipe, and verbally communicated the contents to her eldest son for the benefit of his brothers and sisters. Holford{i), Lord Northington, on an attempt being made to make a child bring some chemical {a) Transfer of Property Act, IV deemed to have been done " does not of 1882, s. Transfer of Property Act (1882), s. 43 of the Transfer of Property Act in s.

Batimore. America.

Source page 99

24 TRUST AGAINST POLICY OP LAW. [LCC. I. recipes given to lier by her father into hotchpot, said, he would not countenance these sorts of recipes, which he thought in most cases savoured of quackery, so as to put a value on them in Chancery ; as for aught he knew a recipe to make mince pies or catch rats might be as valuable. If, however, the recipe is valuable, even though it is for a trivial matter, there does not seem to be any good reason why it should not be made the subject of a trust. If the policy of the law, as in the case of trusts for immoral _ . purposes, or any statutory enactment such as the provi- against sions of the Transfer of Property Act, IV of 1882, s. 14, policy of against perpetuities, prevent the author of the trust from '^''' parting with the beneficial interest in favor of the intended cestui que trust, no valid trust can be created. Lord Baltimore(b), where specific p.;- Lord formance was decreed of an agreement respecting land j in Batimore.

{d) for the determination of any other right to, or interest in,

Source page 100

25 {d) for the determination of any other right to, or interest in, immoveable property, (e) for compensation for wrong to immoveable property, (f) for the recovery of moveable property actually under distraint or attachment, shall be instituted in the Court within the local limits of whose jurisdiction the property is situate : Provided that suits to obtain relief respecting, or compensa- tion for wrong to, immoveable property held by or on behalf of the defendant may, when the relief sought can be entirely obtained through his personal obedience, be instituted either in the Court within the local limits of whose jurisdiction the property is situate or in the Court within the local limits of whose jurisdiction he actually and voluntarily resides or carries on business, or personally works for gain. Explanation. — In this section 'property ' means property situate in British India. This section does not apply to the High Courts in the exercise of their ordinary or extraordinary civil jurisdiction, (a) The jurisdic- tion ofthe High Courts of Calcutta, Bombay, and Madras, with regard to land without the limits of their ordinary original civil jurisdiction, is provided for by the Charter Act(6) and the Letters Patent granted under it. Section 9 of the Charter chlrter'"'^*^' Act provides, that each of the High Courts to be established under the Act shall have such jurisdiction as Her Majesty may, by Letters Patent, grant and direct, subject, however, to such direc- tions and limitations as to the exercise of original civil and criminal jurisdiction beyond the limits of the Presidency-towns as may be prescribed thereby. Section 12 of the Letters Patent provides that the High Court, in the exercise of its ordinary original civil jurisdiction, shall be empowered to receive, try, and Patent, determine suits of every description, if, m the case of suits for land or other immoveable property, such land or property shall be situated, or in all other cases, if the cause of action shall have arisen, either wholly, or, in case the leave of the Court shall have been first obtained, in part, within the local limits of the ordinary original jurisdiction of the High Court, or if the defendant, at the time of the commencement of the suit, shall dwell or carry on business, or personally work for gain within such limits. The High Courts have jurisdiction, under this clause, to enter- _ .. , tain suits for land, whether the land is situated wholly, or j^j in part only, within the local limits of their ordinary (a) See Act V of 1908, s.

[Lee. I.

Source page 101

26 JURISDICTION OF HIGH COURT. [Lee. I. original jurisdiction, leave of the Court having been first obtained in the latter case, (a) But if leave has not been obtained they have no jurisdiction, even though the parties are personally subject to the jurisdiction. (6) Thus the- Courts have jurisdiction to decree foreclosure of lands partly within and partly without the limits of their Original Civil Jurisdiction, where leave has been obtained (c) ; but not if no leave has been granted((?), suits for foreclosure being suits ' for land. '(e) So also suits for partition of land or declaration of title to land(/), for damages for trespass to land(5r), for redemp- tion ofmortgages(A), and for sale of mortgaged property in satisfac- tion ofthe mortgage-debt (i), are suits for land, {j} On the nature of a suit for specific performance of an agreement to mortgage or to sell, there is a difference of opinion. (^) But every suit having reference to land is not necessarily a suit ' for land,' and the Courts have jurisdiction if the object of the suit is not to recover possession of the land or to deal with the land itself Q) ; and it has been held, that a suit to declare that a person resident in Calcutta holds lands in the mofussil subject to (a) Prasannamayi Dasi v. C, 85 ; Sm. for damages for cutting away trees) Jagadamha Dasi v. Padamani Dasi, British South Africa Go. v. Doss Ohose, 5 Cal., 82 ; Sarat Chandra (h) Lalmoney Dossee v. Nahapiet, 37 Cal., 907 ; Matigara Shaw, 1 Ind.

certain trusts, is not ' a suit for land.'(a) A suit in personam can

Source page 102

27 certain trusts, is not ' a suit for land.'(a) A suit in personam can be entertained if the defendant resides within the jurisdiction, as, for example, a suit to restrain a nuisance. (6) In order to found the jurisdiction of the Court some one of three circumstances must exist ; either the defendant must be within the jurisdiction of the Court, or the subject-matter Foundation in dispute must be situated within the jurisdiction of the ^Vn""^''"^' Court, or the contract must have been entered into within the jurisdiction of the Court, (c) The fact that the defendant may- be served with the summons, although he is residing abroad{(i), does not extend the jurisdiction of the Court, (e) In Edwards v. Warden(f), a suit was instituted against four trustees in India of a fund in India, and one formal defendant in England, to recover money payable in England. The trustees were served out of the jurisdiction, appeared and answered and entered into evidence ; and it was held, that as they had not demurred, or pleaded, or moved to discharge the order for service, the Court of Chancery had jurisdiction to determine the questions between the parties. The Court, in enforcing equitable rights over, or titles to, land situated without the limits of its jurisdiction, operates Court of upon the conscience of the defendant or in personam(g), equity acts not upon the property or in rem, and the decree, therefore, ^"personam does not directly affect the property(A) ; but a trust of such rem^° land is supported against a trustee resident within the lj^j ^^y ^^ jurisdiction by a decree operating in personam.{i) It is in a foreign immaterial whether the lands are situated within the country limits of the British empire or are in a foreign country. The Court of Equity will exercise its authority if the defendant is within its jurisdiction. (j) In Angus v. Anfus" Angus{k), a bill was brought, for possession of lands in Scotland, and for a discovery of the rents and profits, deeds and writings, and fraud in obtaining the deeds was charged.

and that the lands in question, and the matter prayed by

Source page 103

I. and that the lands in question, and the matter prayed by the bill, were out of the jurisdiction of the Court. This had been a good bill as to fraud and discovery if the lands had been in France, if the persons were resident here ; for the jurisdic- tion ofthe Court as to frauds is upon the conscience of the party."(a) Of course the Court of one country has no jurisdiction over the Court of another. E., said :— " Upon the whole it comes to this, — that by a proceeding in the Island, an absentee's estate may be brought to sale, and for whatever interest he has, without any particular upon which they are to bid ; the question is, whether the Court will permit the transaction to avail to that extent. To that law he has had recourse, and wishes to avail himself of it : the question is, whether an English Court will permit such a use to be made of the law of that Island or of any other country. It was not much litigated that the Courts of Equity here have an equal right to interfere with regard to judgments or mortgages upon lands in a foreign country as upon lands here. The only distinction is, that this Court cannot act upon the land directly, but acts upon the cons- cience ofthe person living here.(c) Those cases clearly show that, with regard to any contract made, or equity, between persons in this country respecting lands in a foreign country, particularly in the British dominions, this Court will hold the same jurisdiction as if they were situated in England.

the same doctrine, (a) Therefore, without affecting the jurisdiction

Source page 104

29 the same doctrine, (a) Therefore, without affecting the jurisdiction of the Courts there, or questioning the regularity of the proceedings as in a Court of Law, or saying that this sale would have been set aside either in law or equity there, I have no difficulty in saying, which is all I have to say, that this creditor has availed himself of the advantage he got by the nature of those laws, to proceed behind the back of the debtor upon a constructive notice which could not operate to the only point to which a constructive notice ought, that there might be actual notice without wilful default : that he has gained an advantage, which neither the law of this nor of any other country would permit. I will lay down the rule as broad as this : this Court will not permit him to avail himself of the law of any other country to do what would be gross injustice." Acting upon these principles, the Court of Chancery in England has decided questions relating to trusts of lands in Ireland(&), in the Island of Sark(c), in South America(e?), and in the West Indies, (e) It has ordered a sale of lands abroad(/), and has given relief against a fraudulent conveyance. (5^) In Paget y. Ede(h), it was held, that a foreclosure decree being a decree in personam depriving the mortgagor of his personal right to redeem, the Court had juris- diction tomake such a decree in respect of a mortgage between an English mortgagor and mortgagee of land in one of the colonies. There must be a privity between the plaintiff and defendant, and it must appear that some contract or personal obliga- tion has been incurred moving directly from the one to ^"^'^''y- the other, (i) The jurisdiction of the Court is foimded like all other jurisdic- tion ofthe Court, not upon any pretension to the exercise of judicial and administrative rights -abroad, but on the restrai^ning; circumstance of the person of the party on whom the proceeding order is made being within the power of the Court, ^y °*er And, acting upon the foregoing principles, it can restrain °"^ ^' the party within the limits of its jurisdiction from doing anything abroad, whether the thing forbidden be a conveyance or other (a) 3 Atk., 589. (/) Eoberdeauv. Rous, 1 Atk., 543. (b) Earl of Kildarev. British South Africa Co. (1892), 2 (e) Lord Cranstown v.

act in pais, or the instituting or prosecution of an action in a

Source page 105

I. act in pais, or the instituting or prosecution of an action in a foreign Court, (a) And therefore the Court of Chancery in England has restrained persons within the jurisdiction from suing in the. Ecclesiastical Court(6), the Admiralty Court(c), in the Courts in Ireland{d), Scotland(e), and the Colonies(/), and has restrained a defendant from taking possession, (g') If, however, a contract relating to land situated out of the jurisdiction be one which the lex loci rei sitae renders incapable of fulfilment, the Court will not enforce the contract against the proceeds of a sale of such land coming to the possession of parties within the jurisdiction, though they take such proceeds bound by the same equities as affected the party to the contract under whom they claim. (^) The decree of the Court does not, as we have seen, affect the property directly. It is a personal decree ordering the 4efendant to do certain things. If he neglects or refuses to obey these orders, he can be imprisoned for an indefinite period for contempt of Court, and his property within the jurisdiction can be seized, and thus " his conscience is operated upon." If, however, he is able to evade the process of the Court for arrest and has no property in the country which can be seized, the decree is of course practically useless, (t) As a rule, there is no jurisdiction to determine the rights of parties to foreign immoveables and the Courts of Equity " although armed with much more effectual powers for enforcing their decrees than were possessed by the Courts of Common Law, refused with almost equal uniformity the direct determination of title to foreign land, "(j) Indian Courts are governed by the same principles as the Court of Equity in England, but only so far as such principles are not at variance with express legislative enact- ment, (fc) {a) Lord Portarlington v. Standfield, 9 Hare, 3 M. & K., 108. 234 ; 10 Hare, 254 ; Norris v. {b) Hill V.

Moveable property has no locality, but is subject to the law

Source page 106

31 Moveable property has no locality, but is subject to the law which governs the person of the owner. Accordingly, Trusts of moveable property abroad belonging to a British subject moveable may become the object of a trust, which will be recognized property abroad. in this country, (a) I shall now deal with the object for which a trust is created. 17, that trusts may be dividedtrusts mayinto be enforcedlawful andby unlawful,a Court of Equity,and that all lawfuland that, lawful,^^'i^^^ as a rule it may be laid down, that a trust is lawful until the contrary is shown ; and that where a trust is unlawful and fraudulent, a Court of Equity will remain neutral, and will neither enforce the trust nor relieve the person creating it, unless the illegal purpose fails to take effect. In considering whether the object of the trust is one permitted by the law, the general rule to be followed is, that the intention of the author of the trust is to be carried into effect, where it is not against good ^ultlor policy (6) ; " it is the intention of the party that creates ascertain- and governs uses and trusts" (c) ; "a trust is created by ingwhe- the contract of the party, and he may direct it as he lawful"^* pleaseth."((^) " What the Court looks at in all charities " (and the rule applies equally to all other trusts) said Romilly, M. E.(e), "is the original intention of the founder, and apart from any question of illegality and various other questions, this Court carries into effect the wishes and intentions of the founder of the charity : and where it sees that those intentions have not been carried into effect, it rectifies the existing administration of the charity for that purpose. The purpose of the trust is lawful unless it is (i) forbidden by law, or (m) is of such a nature that, if permitted, it would p^^^"' ^^' defeat the provisions of any law, or [Hi) is fraudulent, or {iv) involves or implies injury to the person or property of (a) Hill on Trustees, 3 ; Hill v. (e) Attorney-General v.

[Lec. I.

Source page 107

I. another, or (v) the Court regards it as immoral or opposed to public policy. Every trust of which the purpose is unlawful, is void. And where a trust is created for two purposes, of which one is lawful, and the other unlawful, and the two purposes cannot be separated, the whole trust is void." It appears, therefore, that if the object of the trust is con- trary tothe policy of the law, or if it is- founded upon an illegal or immoral contract, it will be void, (a) For example, if the Trusts con- trust is based upon a transaction forbidden by the law(6), trary to policy of or is intended as a fraud upon an act of the Legislature (c), law or such for instance, as a fictitious and fraudulent conveyance founded for the purpose of obtaining a property qualification to upon illegal contract enable the grantee to vote at elections((^), it will be void. void. May{e), a conveyance of property by a father to his son, to give him a qualification to vote, was held not invalid, but a bounty. Groves(f), property was purchased by one person and conveyed to another in order to give the latter a vote at Parliamentary elections, and the Court refused to assist the purchaser, and a suit by him, seeking to make the grantee a trustee, was dismissed. (5^) So an assignment of o/haK^ay* *^® ^^^^ P^^ ^^ ^^ °^^^^ i» *^e army is bad. For half pay is intended by the State to provide decent main- tenance for experienced officers, both as a reward for their past services, and to enable them to preserve such a situation that they may always be ready to return into actual service.

of property Act, 1916, however enacts that subject to the

Source page 108

3S of property Act, 1916, however enacts that subject to the limitations therein contained "no disposition of property by a Hindu, whether by transfer inter vivos or by will shall be invalid by reason only that any person for whose benefit it may have been made was not in existence at the date of such dis- position."(a) Among trusts which, according to English law, are void as being contrary to public policy, may be mentioned those _ , to provide for future illegitimate children. Such trusts future aie- are held to be void, because they tend to encourage immoral- gitimate ity. The law on this point, so far as regards persons children, subject to English law, will be found in the case of Occleston v. Fullalove.Q)) There a testator, who had gone through the ceremony of marriage with Margaret Lewis, his deceased wife's sister, who had two daughters, Catherine and Edith, by him, and who was enceinte with a third at the date of the will, gave a moiety of his property to trustees in trust for Margaret Lewis for life, and after death, for his reputed children Catherine and Edith, and all other children which he might have or be reputed to have by Margaret Lewis, then born or thereafter to be born. Mathew{c), held that Margaret was not entitled to share in the testator's property. The Lords Justices, however, held, that there was nothing in the authorities to prevent a child coming into existence between the date of execution of the will and the death of the testator from taking under the will, and that Margaret was entitled to share.

en ventre take, it is necessarv that the person or the class should be

Source page 109

Section 0 — (6), "that any legatee

But a trust for an illegitimate child in being, or en ventre sa mere, at the time of the creation of the trust, is good if the m"wimate ^^^^^ ^^ clearly designated as the object of the gift, (a) cwfdrenin "In order," said Stuart, V. 0.(6), "that any legatee — being, or whether the legacy be to a class or to an individual — may en ventre take, it is necessarv that the person or the class should be clearly described. Where a gift is made to a child or to children as a class, the natural and proper meaning of the word ' child ' or ' children ' is legitimate child or legitimate children ; but if the object of the gift is clearly described and clearly ascertainable from the words of the will, it matters nothing whether the object of the gift be legitimate or illegitimate, because an illegitimate child, or a number of illegitimate children as a class, if properly described, may be a legatee or legatees just as well as legitimate children. "(c) It is merely a question of designa- tion. (tZ) The principle which may fairly be extracted from the cases upon the subject is this, the term ' children ' in a will prima facie means legitimate children ; and if there is nothing more in the will, the circumstance that the person whose children are referred to has illegitimate children will not entitle those illegitimate children to take. But there are two classes of cases in which that prima facie interpretation is departed from. One class of cases is, where it is impossible from the circumstances of the parties that any legitimate children could take under the bequest. The other class of cases is, where there is, upon the face of the will itself, and upon a just and proper construction and interpretation of the words used in it, an expression of the intention of the testator to use the term ' children ' not merely according to its prima facie meaning of legitimate children, but according to a meaning which would apply to, and would include, illegitimate children, (e) In order to interpret the words of the will, it is always not only allowable, but it is the duty of the Court, to obtain the knowledge which the testator had of the state of his family, so as to ascertain whether the testator intended illegitimate children to take under general expressions used in the will.(/) A trust for a purpose which is forbidden by law is unlawful.

on their public officers any private trust relating to their personal

Source page 110

35 on their public officers any private trust relating to their personal concerns, (a) Another class of trusts, which are void as being against public policy, are those in which an attempt is made to postpone the enjoyment of property for an indefinite period, or to Trusts prevent the alienation of property for ever. Such trusts enjoyment are considered to be injurious to the good of the State, of property and will not be enforced. (6) "A perpetuity," said Lord prrestrain- Guildford(c), " is a thing odious in law, and destructive t"^„^ '^"^" to the commonwealth : it would put a stop to commerce, and prevent the circulation of the riches of the kingdom; and therefore is not to be countenanced in equity."(rf) In England the rule is, that no remainder can be given to the unborn' child of a living person for his life, followed by a remainder to any of the issue of such unborn person, the latter of such re- mainders being absolutely void.(e) The effect of this rule is to iorbid the tying up of lands for a longer period than can elapse until the imborn child of some living person shall come of age ; that is, for the life of a party now in being, and for twenty-one years after, with a further period of a few months during gestation supposing the child should be of posthumous birth. In analogy, therefore, to the restriction thus imposed on the creation of con- tingent remainders, the law has fixed the following limits to the •creation of executory interests : it will allow any executory estate to commence within the period of any fixed number of now-existing lives, and an additional term of twenty-one years ; allowing further for the period of gestation, should gestation actually exist. This additional term of twenty-one years may be independent or not of the minority of any person to be entitled(/) ; and if no lives are fixed on, then the term of twenty-one years only is allowed, (gr) By the Statute 39 & 40 Geo. 98(h), the accumula- tion ofincome is forbidden for any longer term than the ^g^^^^^^' life of the grantor or settlor, or twenty-one years from the death of any such grantor, settlor, devisor, or testator, or during (a) See also the Indian Contract Act create perpetuities by the creation of (IX of 1872) ss. 26 — 28, which declares terms, see Floyer v.

36 sucoESSioK ACT. [Lec- 1.

Source page 111

36 sucoESSioK ACT. [Lec- 1. the minority of any person living, or en ventre sa mere, at the death of the grantor, devisor or testator, or during the minority only of any person who, under the settlement or will, would for the time being, if of full age, be entitled to the income so directed to be accumulated, (a) The law was the same as regards trusts created by will in India up to the passing of the Indian Succession Act, X of 1865. By section 101 of that Act it is provided as follows :— " No bequest is valid whereby the vesting of the thing bequeathed may be delayed beyond the lifetime of one or more persons living at the testator's decease, and the minority of some person who shall be in existence at the expiration of that period, and to whom, if he attains full age, the thing bequeathed is to belong. (6) I Illustrations, {a) A fund is bequeathed to A for his life, and after his death to B for his life, and after B's death, to such of the sons of B as shall first attain the age of 25. Here the son of B, who shall first attain the age of 25, may be a son born after the death of the testator -y such son may not attain 25 until more than 18 years have elapsed from the death of the longer liver of A and B ; and the vesting of the fund may thus be delayed beyond the lifetime of A and B, and the minority of the sons of B. The bequest after B's death is void. (&) A fund is bequeathed to A for his life, and after his death to B for his life, and after B's death to such of B's sons as shall first attain the age of 25. B dies in the lifetime of the testator, leaving one or more sons. In this case the sons of B are persons living at the time of the testator's decease, and the time when either of them will attain 25 necessarily falls within his own lifetime.

Lee. I.] PERPETUITIES AMONG HINDUS. 37

Source page 112

37 {d) A fund is bequeathed to trustees for the benefit of the testator's daughters, with a direction that if any of them marry under age, her share of the fund shall be settled so as to devolve after her death upon such of her children as shall attain the age of 18. Any daughter of the testator to whom the direction applies must be in existence at his decease, and any portion of the fund which may eventually be settled as directed, must vest not later than 18 years from the death of the daughter whose share it was. All these provisions are valid." The rule in this section, it will be seen, does away altogether with the absolute term of twenty-one years, and, owing to the definition of minority, reduces to eighteen years (or to eighteen and the period of gestation when the person in being is unborn) the twenty -one years which went to make up the period according to the English law. (a) This section of the Successidn Act(6) applies to Hindus, Jains, Sikhs, and Buddhists. According to Hindu law, a perpetuity, save in the case of religious and charitable endowments, is illegal, (c) Thus trusts to accumulate property for ninety -nine years((i), Perpetuities to accumulate until the fund reached three lakhs{e), and Hindi^ to postpone enjoyment until the testator's children reached the age of twenty-one(/), have been held to be void ; and the rule cannot be avoided by means of a colourable dedication to an idol.(g') The law of wills among Hindus is analogous to the law of gifts ; a person capable of taking under u will must be such a person as could take a gift inter vivos, and therefore must either in fact or in contemplation of law be in existence at the death of the testator, and therefore a gift to an unborn child, except in the case of an infant in the womb. (a) Stokes's Succession Act, 82. Joges (c) See Transfer of Property Act Chandra Dutt, 8 B. Chundernauih, 8 Cal., 378 ; Act (X of 1865), s.

or an adopted son, is void, (a) And what cannot be done by a

Source page 113

I. or an adopted son, is void, (a) And what cannot be done by a gift, cannot be done by the intervention of a trust. (&) So a trust for the maintenance of a family for ever is void.(c) But a father may delay the rights of his issue by interposing a valid estate previous to theirs, (ci) It is against the policy of the law to permit a trust to be . created with a condition restraining alienation of the aUen^ion°" interests of the cestui que trust generally. For instance, a devise to trustees upon trust for daughters for their "separate and inalienable use" is too remote and void.(e) And such a restriction is void by both Hindu and Mahomedan law. Thus, when a father, during his son's minority, gave certain property to him, and on delivery of possession got feom him a document stipulating that he would not alienate the property, and that, on his death the property shoidd return to the father, — it was held, that the condition against alienation was absolutely void.(/) So, trusts prohibiting or restricting the right of partition are void.(5f) Alienation to a particular person may be restrained, but alienation generally, being repugnant to the estate, cannot. (A) So a trust may be created in favour of a man, to determine and go over on his bankruptcy(i), but a trust to continue after bankruptcy would be void.(_j") For instance, a proviso in a will that the cestui que trust shall not have power to sell, mortgage or anticipate the income of the trust- fund, will not prevent the assignee from taking (a) Jatindra Mohan Tagore v. D., 176; jBe Mabbett, Soudaminey Dossee v. Jogesh Chunder (1891), 1 Ch., 707 ; Be Ross (1900); Dutt, 2 Cal., 262 ; Bhoobun MoKmi 1 Oh., 162 ; Ananta v. Hurish Chunder Chowdhry, Mad. , 200 ; Mahram Das v.

the income on the bankruptcy of the cestui que trust.(a) Such a

Source page 114

39 the income on the bankruptcy of the cestui que trust.(a) Such a condition is inconsistent with, and repugnant to, the gift. It is one of the incidents of property that it shall vest in the assignees of a bankrupt for the benefit of his creditors, and this incident cannot be taken away by the author of the trust. (&) So the right of alienation is one of the incidents of the absolute _ ownership of property ; and therefore, if an absolute gift restraining without the intervention of trustees is followed by a alienation condition restricting the right of alienation, the condition ^f*^"" ^^^°- lute gift. ig wholly void, (c) Where trustees have a discretion as to the manner of the application of the trust-fund for the benefit of the cestui no power to apply it otherwise than for his "^° vency, que trust, but benefit during his life, the discretion is a discretion subject to the incidents of property, and is consequently terminable upon the insolvency of the cestui que trust. The life-interest enures for the benefit of the creditors, and any attempt to continue the insolvent in the enjoyment of the property is in fraud of the law.{d) But where a testatrix bequeathed a share of her residue in trust for her nephew for life, and by a codicil, after reciting that her nephew had become bankrupt and insane, she directed the trustees to apply during his life the whole or such part of the interest of the fund, at such times, in such proportions, and in such manner, for the maintenance and support of her nephew, and for no other purpose whatsoever, as they, in their discretion, should think most expedient, — it was held, that the nephew's assignees were not entitled to any portion of the provision made for him. Roherts(g), were distinguished, on the ground, that in those cases the gift took efEect before the donee became bankrupt, and the income of the fund was either to be paid to the donee or to be applied for his benefit generally. Whereas in the case now under consider- ation, the trustees were only to apply such sums as they thought fit for maintenance and support, there was a trust created for the mere special purpose of supporting and maintaining the nephew, and under such a trust the assignees could take no interest, (fe) ' f (a) Green v. See Re Sanderson's Trust, 3 K. tonholme, 29 W.

If a trust is created for the benefit of two or more persons,

Source page 115

I- If a trust is created for the benefit of two or more persons, and one becomes bankrupt or insolvent, the assignee will be entitled only to his proportionate part. Way (a) freehold and personal property belonging to the husband was conveyed to trustees upon trust to receive the rents and profits, " and pay and apply the same when received, unto or for the maintenance and support of the husband, his wife, and children, or otherwise if the trustees should think proper, to permit the same to be received by the husband during his life, without power to charge or anticipate." The husband became bankrupt, and in a suit by the assignees claiming the whole income of the trust-property, — ^it was held, that a trust had been created for the maintenance and support of the wife and children out of the property during the husband's life. E., said :— " I am of opinion that, so long as the wife and children were maintained by the husband, the trustees had a discretion to give him the whole income, but that it was their duty to see that the wife and children were main- tained. The assignees take everything subject to what is proper to be allowed for the maintenance of the wife and children." Again, where property was vested in trustees upon trust to pay the rents and profits to a certain person for life, provided that, if he became bankrupt, the trustees should apply the rents and profits in or towards the maintenance, clothing, lodging, and support of the cestui que trust, and his then or any future wife and his children, or any of them, as the trustees should, in their discretion, think fit,— ^it was held, on the bankruptcy of the cestui que trust, that his life-estate was forfeited at the time of his discharge, — that, from the date of the vesting order to the time of the discharge, the rents and profits of the estate belonged to the assignee ; that, upon the discharge taking place, the discretionary powers given to the trustees by the settlement might be exercised by them in favour of the insolvent, his wife, and children collectively, or in favour of any of those persons to the exclusion of the others, — and that to whatever extent the power might be exercised in favour of the insolvent, the benefit which he would take by the appointment would vest in the assignee. (&) Again, where a testator bequeathed his residuary estate to trustees, and, after making a provision out of it, for the benefit of his son and for his life, and, after the son's death, for his wife and children, directed that, if his son should assign or charge the interest to which he was entitled for life, or attempt or agree to do any act whereby the same, or any part thereof, might, if the absolute property thereof were vested in him, be forfeited to, or become vested in, any person or persons, then the trustees should (a) 3 Beav., 20.

pay and apply the said interest for the maintenance and support

Source page 116

41 pay and apply the said interest for the maintenance and support of his son and of any wife and child or children he might have, as the trustees in their discretion should think fit, — ^it was held, on the ba,nkruptcy of the son, that the trust for the benefit of the son; his wife, and children was valid, and that the assignees were not entitled to any part of the provision. C., said :— " There is nothing in point of law to invalidate such a gift that I am aware of. It does not follow that anything was of necessity to be paid ; but the property was to be applied ; and there might have been a maintenance of the son, and of the mfe, and of the children, without their receiving any money at all. For instance, the trustees might take a house for their lodging, and they might give directions to tradesmen to supply the son and the wife and the children with all that was necessary for maintenance : and, therefore, my opinion is, that I am not at liberty to take this as a mere gift for the benefit of the son simply. ; but it is a gift for his benefit in the shape of maintenance and support of himself jointly with his wife and children : and if that is the true construction of the gift in question, the result is, that the assignees are not entitled to anything."(a) In Kearsley v. C, in a similar state of circumstances said, that it was not of necessity that any part of the trust-funds, under such a gift, must be applic- able for the separate benefit of the bankrupt ; the whole property might not be more than sufficient for the support and maintenance of the ^\ife and children ; and the benefit which the bankrupt derived from the property might not be capable of severance ; it might be of such a land that no definite portion of the principal or income could, in respect thereof, be diverted from its application for the benefit of the other members of the family, e.g., the joint occupation of a house, which was necessary for the habitation of the wife and children, the expense of which was not increased by the circumstance, that it was also the abode of the bankrupt, (c) A trust for the benefit of a person until his bankruptcy or insolvency, then in the discretion of the trustees for the subsistence of himself and family, was held in Rvfpon v. Anderson(g), the trustees were, after the bankruptcy of the husband and the death of the wife, to pay the income in such manner, for the maintenance and support, or (a) Godden v.

^^ ^^ objection to a trust to determine, in case the cestui

Source page 117

I. otherwise for the benefit of the husband and the issue, as they might think proper. R., said :— " I am not satisfied that the point which has arisen in the present case was argued in Rippon V. Norton.{a) To say that the discretion of the trustees as to the application of the income was gone by the bankruptcy, is to say that it never arose, and the object of the trust would thereby be defeated. I am not sure that the Court would not, in a case like the present, follow the rule laid down in Kearsley v. Woodcock." (b) Although, as appears from the above authorities, a trust Trust to restraining alienation of the interests of the cestui que cease on trust generally, or attempting to continue the interest of bank- the cestui que trust after his bankruptcy, is void, yet there ^^ ^^ objection to a trust to determine, in case the cestui insolvencv que trust shall become bankrupt or insolvent(c), or shall attempt to assign or incumber his interest. («!) The interest of the cestui que trust in such" a case determines as soon as the act forbidden is done, even though the interest is still in expectancy. Thus, where property was settled in the year 1823 on a wife for life, with remainder to the husband, " until he should make any composition with his creditors for the payment of his debts,, although a commission of bankruptcy should not issue against him ; " and in 1842, the husband's principal creditors agreed to take a composition on their debts secured by bills, and the wife did not die until 1852, — it was held, that the composition, though it was not made with the whole of the husband's creditors, and was made during the wife's life, and did not affect the trust- property, nevertheless operated as a forfeiture of the husband's interest, (e) So the interest will determine upon the execution of a composition-deed by the cestui qui trust, even though he does not become bankrupt or insolvent, or execute any assignment of the property for the benefit of his creditors. (/) If a sum of money is left for the purpose of purchasing an annuity for a particular person, with a condition that it shall determine if the annuitant (a) 2 Beav., 63.

shall at any time sell, assign, incumber, or in anywise dispose of

Source page 118

43 shall at any time sell, assign, incumber, or in anywise dispose of or anticipate the same, the annuitant will not be entitled to the value of the annuity, (a) The rules to be followed in determin- ing questions of this class were thus laid down by Turner, V. Hackman{b) : First, that property cannot be given for life any more than absolutely, without the power of alienation being incident to the gift ; and that any mere attempt to restrict the power of alienation, whether applied to an absolute interest or to a life-estate, is void, as being inconsistent with the interest given ; and secondly, that although a life-interest may be expressed to be given, it may be well determined by an apt limitation over. And he also expressed an opinion that the life-interest might be well determined by a proviso for cesser, although it be not accompanied by any limitation over, for no greater efEect could, he thought, be given to a limitation over than to an express declaration that the life-interest should cease. This latter point was expressly decided by Wood, V. Mills, {c) A clause providing for the determination of the interest of the cestui que trust upon the happening of a particular jj.^gj^Q event within a specified time, whether the time is certain cease on or uncertain, is good, e.g., a clause providing against happening disposition during the life of a third person(c?), or before "^J'j^/'''^"'^'' attaining a certain age.(e) When property is settled on A for life, and after her death on B for life, until he shall become insolvent, and then over, the gift over takes effect on B's insolvency in A's lifetime. (/) Clauses of forfeiture will be construed strictly, and therefore the very act provided against must have been done.(5') clauses o£ Thus a proviso giving property over, if the cestui que trust forfeiture or attempt to alienate it, does not come construed should alienate, his bankruptcy, which is an alienation by ^ ""^ ^' into effect on operation of law, and not a voluntary act.(^) It would, however, come into effect if he presented a petition in insolvency; and the penalty of forfeiture on bankruptcy is not incurred by a composition with creditors, (i) The words of the clause, however, may be so wide as to show that the author intended that it should come into effect upon the cestui que trust doing any act which would affect the life-estate, (y) (a) Hatton v. D., Re Porter (1892), 3 Ch., 481 ; Adams v.

[Lee, I.

Source page 119

TRUST FOR IMMORAL PURPOSES. [Lee, I. So the giving of a warrant of attorney will not work a forfeiture, unless done as a contrivance to evade the prohibition against alienation(a) ; nor, even in England, will the marriage of a feme sole cause a forfeiture of an annuity which is to determine upon the annuitant's doing any act by which the property " should be vested or become liable to be vested in any other person. "(&) So a charge on arrears of an annuity is good(c), or a charge on the income as it accrues, (ci) A general assignment of property will not include property liable to forfeiture, (e) Where there is a clause of forfeiture on bankruptcy, and the cestui que trust becomes bankrupt, and the bankruptcy is annulled before any beneficial interest in the property has come to the assignee, the clause will not take effect. (/) The presentation of a petition in insolvency by the insolvent himself is a voluntary act, and as the property of the insolvent vests in the Official Assignee, the presentation of a petition would be an alienation of his property, and would work a forfeiture. (^) The owner of property, whether moveable or immoveable, cannot create a trust of it for his own benefit to go over in ease of his bankruptcy or insolvency, (fe) ^^^ trust, as well as any contract for immoral pur- immoral purposes, poses, is of course void.(i) If the purpose for which the trust is created fails, because it is unlawful or fraudulent, a Court of Equity will not act. It cannot enforce the trust in favour of the cestui que trust, for that would be to declare the trust to be good ; and it (a) Avison v. Hale, 13 Ves., 404; 530 ; Barnett v. Margham, 14 Sim., 230 ; Townsend 95. Early, 34 Beav., 23 ; Ee Cobgrave wood V.

will not restore the property to the author of the trust, because a

Source page 120

45 will not restore the property to the author of the trust, because a man cannot be allowed as plaintiff to plead his own wrong. A right of action cannot arise out of fraud. In such a case, therefore, if the property has got into the hands of the trustee, the author of the trust is without remedy, for where there is an equal wrong, the title of the holder shall prevail, (a) But though the author of an unlawful or fraudulent trust cannot recover the property from the trustees, persons claiming through him may sue for the purpose. " There is a great difference," said Lord Eldon, " between the case of an heir coming to be relieved against the act of his ancestor in fraud of the law, and of a man coming upon his own act under such circumstances. "(6) A defendant cannot set up the fraud of his ancestor, (c) There is an exception to the general rule that where a trust has been created for an unlawful or fraudulent purpose, the Court will not interfere ; for it will do so where the Illegal illegal purpose fails to take effect, and nothing is done P".JP°se under it. The mere intention to effect an illegal object will not deprive the author of the trust of his right to recover the property. ((?) If the defendant wishes to rely on the illegality of the transac- tion as a defence, he must plead it in distinct terms, (e) In order to complete a trust, there must be a cestui que trust, a person to be benefited by the trust, otherwise the trust fails, and the property appropriated for the purpose results Must be a, to the author of the trust or his representatives. In Bug- ^^^j"* ^"* land, it has been repeatedly held, that a trust, merely for the purpose of keeping up tombs or buildings, which are of no public benefit, but only an individual advantage, is not a charitable use, but a perpetuity, and is void.(/) (a) Cottington v. Otty, 35 Beav., 208 ; 163 ; Hamilton v.

46 TRUSTS PARTLY LAWFUL.

Source page 121

The object of a trust must, as we have seen, be lawful. Where T art *^® object is clearly unlawful, no difficulty arises, for the ly JaTBrfuf' " Court will not enforce an illegal trust. But the object may and partly be in part lawful and in part unlawful, and the question unlawful. tiien arises as to whether the whole trust fails, or whether the lawful part remains good. If property be given to trustees, to apply part thereof for an unlawful purpose, and to hold or apply the residue for a lawful purpose, then, unless the amount intended to be applied for the unlawful purpose can be ascertained, the whole gift will fail(a); but the fact that the amount to be applied for the unlawful purpose has not been expressly stated in the gift, will not make the whole gift void ; and the Court will, if it be practicable, ascertain the amount which would have satisfied the unlawful purpose, and hold the gift good as to the residue. (6) The Indian Contract Act(c) provides, that where persons reciprocally promise, firstly, to do certain things which are legal, and secondly, under certain specified circumstances, to do certain other things which are illegal, the first set of promises is a contract, but the second is a void agreement ; and that, in the case of an alternative promise, one branch of which is legal, and the other illegal, the legal branch alone can be enforced. It has sometimes been held that when the lawful purpose is charitable, the unlawful part lapses into the lawful and the whole is available for the lawful purpose, (ci) If a trust is created of immoveable property in a foreign _ . J country, the trust must conform to the laws of the land immoveable where the property is.

LECTURE II.

Source page 122

Declaration of trust — Indian Trusts Act, ss. 5, 6 — Intention to create trust must be shown — Valuable consideration — Consideration not necessary — Transmutation of possession — Voluntary settlements — If incomplete, not enforced against settlor — If nothing more to be done by settlor, trust Is complete — Assignment by cestui que trust — Notice — What amounts to a valid declaration of trust — Ineffectual assignment — Chose-in-action — Subsequent disclaimer by trustee — Settlor cannot revoke voluntarily — Setting aside voluntary settlement — Defrauding creditors — To what property Statute applicable — Question of fraud is one of fact — Assignment by way of mortgage — Valuable considera- tion not support when mala fides — Sale to defeat Crown — Assign- ment in favour of one creditor — Voluntary settlements within Statute — Indebtedness of settlor — Secured debts — Consideration paid to third person — Voluntary settlement only void as against existing creditors — Unless fraud — How far settlement void — Subsequent purchase must be for value — Indian Insolvency Acts — Conveyances with power of revocation — Effect of Statute — Valuable consideration — Marriage — Extrinsic evidence admissible to show consideration — Settlement not set aside as against grantors — Voluntary settlement in expectation for death — Rectifying settlement — Enforcement — On whom binding — Creditors' deeds how far revocable — Johns v. James — Execution of deed by creditors — Deed not communicated to creditors — Trust by will for payment of debts. I NOW propose to treat of the manner in wMch a trust may be declared. The Indian Trusts Act provides that " No trust in relation to immoveable property is valid un- of^trust*'°" less declared by a non-testamentary instrument in writing signed by the author of the trust or the trustee and registered, or by the will of the author of the trust or of the trustee and no trust in relation to moveable property x"'*^^" a ^ is valid unless declared as aforesaid, or unless the 35. e„ (,. ' ownership of the property is transferred to the trustee. " Subject to these provisions a trust is created when the author of the trust indicates with reasonable certainty by any words or acts (i) an intention on his part to create thereby a trust, (ii) the purpose of the trust, (iii) the beneficiary, and (iv) the trust-property, and (unless the trust is declared by will or the author of the trust is himself to be the trustee) transfers the trust-property to the -trustee."

Trusts of moveable property may be declared by parol or by

Source page 123

IL Trusts of moveable property may be declared by parol or by an instrument in writing, which may be either testamentary or non-testamentary. (a) The Hindu law, in no transaction, abso- lutely requires a writing ; nor so far as I am aware, does the Mahomedan law. (6) In the territories to which the Indian Trusts Act has been .applied, a trust of immoveable property cannot be created by parol. Outside such territories, a declaration of trust need not be in writing, so long as the settlor constitutes himself a trustee, (c) If however the declaration is embodied in an instrument it requires registration(d) and if a stranger is constituted a trustee, there must be a transfer and the conveyance must conform to the law relating to transfer of property for the time being in force, (e) In Richards V. Jessel stated the law thus : " A man may transfer his property without a valuable consideration in one of two ways : he may either do such acts as amount in law to a con- veyance or assignment of the property and thus completely divest himself of the legal ownership, in which case the person who by those acts acquires the property takes it beneficially or on trust as the case may \)e{g) ; or the legal owner of the property may, by one or other of the modes recognised as amounting to a valid declaration of trust, constitute himself a trustee, and, without an actual transfer of the legal title, may so deal with the property as to deprive himself of its beneficial ownership and declare that he will hold it from that time forward on trust for the other person. "(A) (a) Fordyce v. C, in a record-of-rights is insufficient to 587 ; M'Faddenv. Jenkyns, 1 Hare, 461; create a. trust ; Dlian Singh v. Ram ChuTider, 17 Cal., (e) Transfer of Property Act (IV of 620 ; Ram Singh v.

These principles have been cited with approval by Indian Courts, (a)

Source page 124

4& These principles have been cited with approval by Indian Courts, (a) The constitution of trusts by means of wills is governed by the laws relating to testamentary disposition. (6) The Indian Trusts Act expressly repeals the provisions of the Statute of Frauds in the territories to which it extends, but it is doubtful whether in the Presidency-town of Calcutta the Statute has ceased to be in force, (c) But these rules regarding the valid constitution of trusts do not operate so as to effectuate a fraud and in this respect the law in England has been followed in India. (<?) The Statute does not prevent the proof of a fraud. " Consequently notwith- standing the Statute, it is competent for a person claiming land conveyed to another, to prove by parol evidence that it was so conveyed upon trust for the claimant and that the grantee, knowing the facts, is denying the trust and relying upon the form of the conveyance and the Statute, in order to keep the land himself, and the principle applies, not only where the trustee, whose conscience is affected, is the defendant, but also as against volunteers or creditors claiming under him. "(e) , It is only necessary that the person creating the trust shall clearly show his intention to create the trust(/ ), and shall intention point out the subject-matter of the trust and the persons to create who are to benefit by it. (gr) Technical words are not neces- trust must sary, but if they are used, their technical meaning must ^^ shown, be given to them. (A) Where there is valuable consideration, and a trust is intended to be created, formaUties are of minor importance, since, if the transaction cannot take effect by Valuable way of trust executed, it may be enforced by a Court of ^°^^^ ^^^' Equity as a contract, (i) Where immoveable property was given into the possession of the defendant under an order of a revenue officer, which directed the defendant to sell the crops, and after payment of the Government dues, to account for (a) See Hirbai v. Jan Mahomed, 7 has to be manifested and proved by- Bom., 229 (250) ; Ashabhai v. Hale, 3 Tyeb, 9 Bom., 115 (122) ; Bhashar v. This was thought to be Saraswatibai, 17 Bom., 486 (500); a rule of procedure in the Bombay Oordhandas v. Eamcoover, 26 Bom., case aforesaid. See page 13, note (I) 449 (471) ; Manchershaw v.

given any consideration, is Ellison v. Ellison.(f) " I take

Source page 125

II. the profits to the plaintifi on his claiming it, it was held that the defendant was not a depositary but a trustee, (a) It is not necessary there should be any consideration to support _ . . a trust. (6) If a trust has been perfectly created, it is not tion not necessary that there should have been a transmutation of necessary. possession, and it cannot afterwards be defeated by any Transmu- ^'Ct of the settlor, (c) As a general rule, it may be laid tationof down that, in order to make a voluntary declaration of possession. trust binding upon the author of the trust, he must have completely parted with all his interest in the property to the trustee, or have declared himself to be a trustee of the property for the benefit of the cestuis que trusfent.(d) It is not necessary, in order that the trust may be binding, that it should be com- municated to,or accepted by, the volunteer, (e) The leading case with reference to settlements and trusts in favour of a volunteer, — that is to say, a person who has not given any consideration, is Ellison v. Ellison.(f) " I take ^tttm^nts the distinction to be," said Lord Eldon, " that, if you want the assistance of the Court to constitute you cestui que trust, and the instrument is voluntary, you shall not have that assistance for the purpose of constituting you cestui que trust; as upon a covenant to transfer stock, &c., if it rests in covenant and is purely voluntary, this Court will not execute that voluntary covenant. But if the party has completely transferred stock, &c., though it is voluntary, yet the legal conveyance being effectually made, the equitable interest will be enforced by this Court. ... If the actual transfer is made, that constitutes the relation between trustee and cestui que trust, though voluntary, and without good or meritorious consideration." If incom- But although a voluntary settlement or grant may plete, not be valid as against creditors and purchasers, it may be against incomplete ; and then will not be enforced against the settlor. settlor."(g') A volunteer has no equity to enforce a mere (o) Vital Vishva Nath Prabhu v. Hingston, 3 Sm. & G., 337j Wheaiky Bam Chandra Sadashiv Kirkire, 7 B. v. Ellison, 6 Ves., 662 ; Jeffreys complete transfer, s»e Parndl v. v.

Toluntary promise to assign against the assets of the person who

Source page 126

51 Toluntary promise to assign against the assets of the person who made the promise, (a) A voluntary covenant to transfer stock is a mere imperfect gift which equity will not assist, (b) So is a voluntary covenant to transfer shares, (c) A voluntary settlement is incom- plete unless the interest of the donor has been completely parted with, and therefore a voluntary agreement to declare a trust will not be enforced. ((?) Even if the settlor has executed a deed pur- porting topass his interest, and he intends to carry out the transac- tion, yetif, for any reason, he has not in fact parted with his interest, the trust cannot be executed, (e) But when a covenant or other instrument creates such a complete obligation on the part of the covenantor, that damages would be recoverable in case of breach, effect will be given to it, as when a person covenants to pay a sum of money or an annuity. (/) So a settlement or gift by the bond of the settlor may be enforced against the obligor's estate(5r) ; and a person claiming under such a bond is within the Statute, 13 Eliz., c. 5, and is entitled to the protection of the Statute like any other creditor. AudlandQi), it was held that a covenantee under a voluntary covenant for further assurance could not prove under an administration-suit against the covenantor's estate. Barna/rd{i), this was allowed, upon the ground that though the Court might not specifically execute the covenant as damages were wanted, it could give damages.(y ) The delivery of property or securities passing by delivery is valid. (A) If, however, the grantor adopts some other mode of transfer than that which is necessary to effect a complete assignment of the property, the transferee will not be entitled unless the instrument can be construed as a declaration of trust. For instance, an Pye,Paterson, 18 Ves., 32 Gh.149. SetOement,£!Zj« (1897), 37 1 Ch., 489.Ch.

[Lec. IL

Source page 127

IL attempt to transfer shares or property of that description by some other mode than that which is effectual by the rules of the company or society in which the shares are held is not an effectual transfer : as, for instance, where the owner of shares endorsed on the certi- ficates the words, " I hereby assign, &c.," to others, but no transfer was executed, he was held to have a locus pcenitentiw so long as the gift was incomplete. So a power-of-attorney given to the trustee to transfer will not be sufficient unless he acts upon it. (a) Again, where the transfer is in other respects imperfect and does not operate on the whole property(6), and if the assignment or other mode of gift or settlement is incomplete and the gift is intended to take effect by it, the Court will not construe it as a declaration of trust, and upon this ground give effect to it, for then every imperfect instrument would be made effectual by being converted into a perfect trust, (c) Where a cheque was given to one in trust for another, with a verbal direction that the amount was to be in trust instead of a legacy given by will to the proposed cestui que trust, the declaration was held to be inoperative(d) ; and where a cheque was given by the owner to his young child with a declara- tion before witnesses, but was afterwards retained by the owner till his death(e), no trust was created. But an instrument executed as a present and complete assignment (not being a mere covenant to assign at a future time) is equivalent to a declaration of trust ; therefore, such an instrument will pass promissory notes of the grantor, though neither specifically mentioned in the deed, nor indorsed by him.(/) This case, and the observations in Grant v. Grant(g), would seem, to a certain extent, to modify the doctrine in Mihroy v. LordQi), which, however, was a decision of the Lords- Justices. And if nothing more remains to be done or can If nothing more to be be done by the grantor or donor, — ^if as far as he is con- done by cerned, the conveyance or assignment is complete, and settlor, he has done all that is necessary to be done, having regard trust is complete. to the nature of the property, — the assignment or other assurance will be valid in equity, (i) Thus, an assignment (a) Milroy y.

volunteer who does give notice. As against the settlor an ° "^^*

Source page 128

Section 6 — , 187 ; Re Griffin (1899), 1 Gorringe v

53 -of a policy of assurance by deed is valid, although the grantor may retain the deed and give no notice of the assignment to the office, (a) And where there was a voluntary assignment of a chose-in-action followed by a power-of-attorney to receive it, this would seem to be sufficient to give a right in equity to have the deed enforced «ven after the death of the assignor. (&) After a valid declaration of trust, the fact that the trust-fund is found at the settlor's death mixed up with his own moneys, does not afiect the validity of the trust, (c) When property is vested in a trustee, the cestui que trust may make a valid assignment of his beneficial interest, and the assignee will have the right to enforce it by proceeding Assignment against the trustee.(eZ) Notice to the trustee is not neces- f^J^f "* ^"* sary to perfect the trust, even as against a subsequent ' volunteer who does give notice. As against the settlor an ° "^^* equitable interest is perfectly transferred without notice, (e) But St, voluntary assignment of a mere expectancy in an equitable interest, not communicated to the trustees, does not amount to the creation of a trust. (/) If notice is not given, the trustee will be justified in paying over the fund to the grantor. (gr) And if the settlor conveys his equitable interest to trustees, and directs them to hold it upon trust for another, that will be as effectual as if he had declared himself a trustee. (A) So it will be sufficient if he directs his trustees to stand possessed of the property upon the new trust(*), or even if he assigns it to the new cestui que trust without the intervention of a trustee.(y ) 1 M. & C, 238 ; Milroy v. 6., 187 ; Re Griffin (1899), 1 Gorringe v. Irwell India Rubber Co., Oh., 408 ; In re Patrick, (1891), 1 Ch., 34 Oh. Kettlewell, 1 Hare, 464 ; (a) Fortescue v. R., 4 Eq., 564 ; Be Parsons, 45 Ch. -21 Beav., 229 ; Pedder v.

[Lec. IK

Source page 129

IK A voluntary settlement may be effected by a declaration of What trust, by whicli the owner of property declared either him- amounts to self, or another person in whom the property is vested, a a valid trustee for the voluntary grantee, (a) A declaration of declaration of trust. trust is not confined to any express form of words, but may be indicated by the character of the instrument. (6) If the settlor shows no intention of keeping a control over the settled property otherwise than as a trustee for the objects of his bounty, the trust will be effectual.(c) The tendency of modern decisions is to construe a voluntary settlement or gift inopera- tive, as a complete transfer of the property as a declaration of trust, if this can be done consistently with the previous authorities, (c?) A receipt in the form " received of A, for the use of B, £100 to be paid to B at A's death " is a sufficient declaration of trust.(e) In Grant v. Grant(f ), Lord Romilly said, that if A, having a sum of consols, were to say to B, " I give you that sum," or to C " I have given that sum to B," that would be sufficient to make A trustee for B. MallesonQi) ,. the donor made and signed a memorandum, " I hereby give and make over to A & bond," specifying it, but retaining it in his own possession ; and it was held, that there had been a sufficient declaration of trust in favour of A.{i) A banker, who debits himself in his books with money in favour of another, thereby declares himself a trustee of it.{j ) So, where a person deposits securities for money in the hands of a trustee, stating that he intends them as a provision for the volun- tary grantee, (fc) An assignment, or attempted assignment, by the grantor, of property, in a way which is ineffectual to pass the Ineffectual interest, will be good if the assignment is upon trust for the; assignment grantee in such terms that the Court can construe it as a declaration of trust by the grantor. (?) (a) Oollinson v. Palmer, 4 K. & J., 204. (j) Stapleton v. Stapleton, 14 Sim., (d) See Kekewich v. See Re Ellen- ment inIndia in such cases, see Ashabai borough (1903), 1 Ch., 197.

A complete voluntary settlement cannot be revoked

Source page 130

55 An assignment of a chose-in-action{a), coupled with a declara- tion that the fund shall be held upon certain trusts for the . benefit of the assignor, and ultimately of the assignee, is ^aZV' valid. (6) And a declaration of trust will be valid though the settlor may retain control over the fund(c) or keep the instru- ment declaring the trust in his possession. (<Z) A mere expression of intention to be carried into efEect by some future act does not amount to a declaration of trust, (e) If a settlor conveys his property to a trustee in such a manner as to completely divest himself of it, and the trustee sub- sequently disclaims, the accident of the disclaimer has Subsequent been held not to vitiate the deed, but the Court will by trusted, appoint a new trustee. (/) If the person in whose favour a voluntary gift is made incurs expense in respect of the property, the subject of the gift, with the sanction of the donor, he may call for a con- veyance ofit.{g) A complete voluntary settlement cannot be revoked by settlor a subsequent voluntary settlement, even if the property cannot becomes re-vested in the settlor, for he will then take it not revoke a trustee. (A) voluntarily. absolutely, but as According to Shiah law, a man who devotes property to charitable or other uses, and transfers the proprietary right therein to a trustee, cannot, at his pleasure, take it back from the trustee, whom he has constituted the owner, and give it to another person, unless, on the creation of the trust, he has reserved to himself the right to do so in express terms, (i) But if a person, without the privity of any one, and without receiving consideration, makes a disposition as between himself -and trustees for purposes connected with himself, he is merely directing the mode in which his own property shall be applied for Ms own benefit, and the deed will operate merely as a power to the trustees and will be revocable by the party making it, for the (a) See Transfer of Property Act (IV (/) Jones v. D., 179. & J., 517. (c) Wheatley v. Ellison, 6 Ves., 656 ; (d) Be Way's Trust, 2 DeG. Sankarasubramanya, 18 (e) Bayley v. Venkayamma, 5 M. (i) Hidait-oon-nissa v.

Setting If a voluntary settlement has been obtained

Source page 131

Section 4 — (c) These Statutes were in force in the Presidency- towns until June 1882

II. settlor being the only cestui que trust, may direct the disposition of his own trust-fund, (a) Setting If a voluntary settlement has been obtained by fraud voluntary °^ undue influence, or has been executed under a mistake, settlement. it may be set aside. (6) A voluntary settlement made with the intention of defrauding creditors or subsequent purchasers will be void as against wedhofs"^ them under the Statutes 13 BUz., cap. 4.(c) These Statutes were in force in the Presidency- towns until June 1882.(<i) In Sham Kissore Shaw v. Cowie{e) they were held to be applicable to persons other than European British subjects ; and in Gnanabhai v. Srinivasa Pillai{f ), the Court said that the principles applied in the English cases may fully be made applicable to voluntary transactions between natives, (gr) In Azimunnissa Begum v. Dale(h), Bittleston, J., seemed to think that the Statutes did not apply. Mir Mohamed Mozaffar, the Privy Council felt no doubt that the principles of the Statutes and of the common law for avoiding fraudulent convey- ances were proper guides in administering law in India according to equity and good conscience. (*) ' i The absence of consideration was taken to be comprised in the term ' fraudulent,' though the Act did not specially refer to voluntary conveyances in so many words. (_;) But the extent of the value given was not taken into consideration ; the question was, whether the transaction was one of bargain or of gift merely, and the fact that some value, e.g., a covenant to indemnify against expenses, was given, might be proved aliunde.(k) The operation of these Statutes was thus to destroy all estates created by volim- tary conveyances, at the suit of creditors and purchasers. (?) (a) Kanye Dass Byragee v.

To remedy this wholesale condemnation of voluntary <}on-

Source page 132

57 To remedy this wholesale condemnation of voluntary <}on- veyances, the Voluntary Conveyances Act was passed in 1893. It declares that no voluntary conveyance of any lands, tenements or hereditaments, whether made before or after the passing of the Act, if in fact made bond fide and without any fraudulent intent, shall be deemed fraudulent or covinous by reason of any subse- quent purcTiase for value or be defeated under any of the provisions of the said Act by a conveyance made upon any such purchase, (a) But by Transfer of Property Act, the Statutes of Elizabeth were repealed in India and by section 53 it is enacted :— " Every transfer of immoveable property, made with intent to defraud prior or subsequent transferees thereof for consideration, or co-owners or other persons having an interest in such property, or to defeat or delay the creditors of the transferor, is voidable at the option of any person so defrauded, defeated or delayed. Where the effect of any transfer of immoveable property is to defraud, defeat or delay any such person, and such transfer is made gratuitously or for a grossly inadequate consideration, the transfer may be presumed to have been made with such intent as aforesaid. Nothing contained in this section shall impair the rights of any trans- feree in good faith and for consideration," In certain respects this section does not even purport to go so far as the Statutes of Elizabeth. 5, applied to transfers both of realty and personalty, section 53 of the Indian Act applies only to immoveable property. 4, relates to realty only and was intended for the protection of purchasers only, which term, though it included of course mortgagees, could not include a mere holder of a money-decree, who was not a purchaser within the meaning of the Statute.(6) In the absence of a specific charge under the decree, the decree- holder could not avail himself of 27 Eliz., cap.

[Lec. IK

Source page 133

IK operative during the life-time of the assignor, except as regards- such as can be taken in execution, (a) The question as to whether the assignment was with the intent to hinder, delay, or defraud creditors, is one of fact. And oHrauTs " *^® Court or Jury must consider whether, having regard one of fact. *° ^1' ^^^ circumstances, the transaction was a fair one, and intended to pass the property for a good and valuable consideration. "(6) Circumstances of suspicion do not amount to proof of fraud(c), even when the conveyance is absolute and the grantor remains in possession, though this is generally considered to be an indication or badge of fraud, (i) But where the conveyance is not absolute, to take effect imme- diately, asin the case of mortgage, and the mortgagee is not to take possession until a default in the payment of the mortgage- money, then, as the nature of the transaction does not call for any transmutation of possession, the absence of such transmuta- tion seems to be no evidence of fraud, (e) If it be found as a fact that there was no fraud, the conveyance will, as a rule, be good under the Statute.(/) Where there is no consideration, (a) Norcutt v. Dodd, Or. & Ph., ment that the transfer is made honestly, 100 ; Ideal Bedding Co. v. Holland truly and bon4 fide ; and to which may (1907), 2 Ch., 157. be added the other circumstances (6) Hall V. Saloon Omnibus Co., equally significant, viz. ; 4 Drew. , 492 ; iSankarappa v. Katnayya, (vii) ThSt the deed is antedated,, 3 M.

the intent may be presumed, but the intent to defraud, defeat,

Source page 134

59 the intent may be presumed, but the intent to defraud, defeat, delay or hinder must be the sole conceivable or dominant motive and that if there is consideration, this intent cannot be presumed but must be proved, and must be shown to have been one to which the purchaser for value was a party for the purpose of enabling the debtor to retain a benefit, and that this being proved, the fact that consideration has passed will not avail to save the transaction from any creditor impeaching it as an attempt to defraud, defeat, delay or hinder him. (a) A valuable consideration will not support a conveyance if there be mala fides, and an intent to delay or defraud creditors. Even an ante-nuptial marriage settlement may consWeration be set aside. Of course, those who undertake to impeach not support- for maid fides a deed which has been executed for valuable ed when consideration, have a task of great difficulty to discharge, (b) "^ '^^' So, if the object of the conveyance be to place the property beyond the reach of process, or to defraud future creditors, it will be void, though it may be, or may purport to be, for value, (c) An assign- ment bya prisoner, on the eve of trial for felony, of all his effects upon certain trusts, is within the Statute, and void ^^^ crowii as against the Crown(c?) ; but otherwise, if made bond fide and for value, for instance, to secure an existing debt.(e) To support a conveyance, good faith is needed and that at least on the part of the transferee. (/) The fraudulent intent of the transferor cannot by itself vitiate the transaction. If however the transferee had notice of the fraudulent purpose and was privy to the furtherance of such intent, he is in no better, predicament than if his transfer was for no consideration at a.ll.{g) An (a) Bhagwant v. Kedari, 25 Bom., T., 201 ; Normal Das v. J., 293 ; Chidam- But the plaintiff suing on his document baram v.

assignment in fraud of creditors can be upheld to the extent to

Source page 135

II. assignment in fraud of creditors can be upheld to the extent to which it i^ supported by consideration, (a) A sale of property for good consideration is not fraudulent and void, merely because it is made with the intention to in tavour^of defeat the expected execution of a judgment-creditor.(6) one creditor. And a bond fide assignment for the benefit of creditors generally is not within the Act, though made with the intent to delay an individual creditor, (c) Nor is such an assign- ment void, if otherwise honest, because it relates only to a part only of the estate or makes a stipulation in the debtor's favour. ( Cal., 825 ; Rajani Kumar v. Bulaki, Gmi.r Kishore, 35 Cal., 1051; Uma- 0 1. Joy Krishna, 29. (d) Maskelyne & Cooke v. Kiman, 33 I. does not constitute fraud.

impugned, is there any reason why the unsatisfied creditor should

Source page 136

61 impugned, is there any reason why the unsatisfied creditor should obtain the exclusive benefit of recovering from the alienated property when there may be others equally entitled, (a) A single- creditor without any charge upon the specific property alienated has no better right than the bond fide alienee to insist on its applica- tion to his claims. (6) If, however, the transfer is not in reality a preference of an actual debt, but is a mere colorable device to place the debtor's property beyond the reach of any or all of his creditors or if the transaction extends beyond the necessary purpose of a mere preference, so as to secure to the debtor some benefit or advantage or to unnecessarily hinder or delay creditors the transfer- is fraudulent. (c) It has been held that the settlement giving such preference can only be set aside in proceedings instituted on behalf of or for the benefit of all the creditors and not at the suit of any individual creditor whose object is only to ask the property in satisfaction of his own debt.(cZ) In view of the express provision of the Transfer of Property Act that every transfer made with intent to defraud the creditors of the transferor of immoveable property is voidable at the option of any person(e) so defrauded, the better procedure appears however to be to allow a suit at the instance of any individual creditor without a representative action, though the decree may declare " the transfer void against the plaintiff and all creditors, if any."(/ ) The fraudulent transfer can only be set aside in a suit properly framed, for the purpose and cannot be pleaded as a bar in action. (^) The mere fact that the settlement is voluntary will not invali- date it. The principle is this : The language of the Act being,. (a) Bhagwant V. Maharaj Bahadur, (b) Ibid., at 215. Mooshahar, 34 Mooshahar, 34 Cal., 999. 11 Bom., 660 (the defeat of creditors (/) Subramaniay. Devar, 27 creditor is sufficient ; Fakira v.

that any conveyance of property is void against creditors if made

Source page 137

II. that any conveyance of property is void against creditors if made with intent to defeat, hinder, or delay creditors, — ^the Court is to decide in each particular case whether, on all the circumstances, it can come to the conclusion, that the intention of the settlor in making the settlement was to defeat, hinder, or delay his credi- tors, (a) Nor will the fact that the settlement comprises all the settlor's property be sufficient ground for setting it aside. (6) And extrinsic evidence is admissible to show, that valuable considera- tion was in fact given for a deed which appears on the face of it to be voluntary(c), or that the settlement was bond fide, though the practice of framing deeds so as not to show the real nature of the transaction carried out by them ought to be dis- of^se'tHo""^ couraged.(rf) The indebtedness of the settlor at the time of the settlement is usually relied upon as showing the intent to delay and defraud creditors ; but it is only one of the circumstances which the Court has to consider, (e) The indebtedness need not be to the extent of insolvency, though this was formerly held to be necessary. (/) But this is not the law now. " With respect to yoluntary settlements," said Wood, V. C.(^), " the result of the authorities is, that the mere fact of a settlement being voluntary is not enough to render it void against creditors : but there must be unpaid debts which were existing at the time of making the settlement, and the settlor must have been at the time not necessarily insolvent but so largely indebted as to induce the Court to believe that the intention of the settlement, taking the whole transaction together, was to defraud the persons who, at the time of making the settle- ment, were creditors of the settlor. (A) On the other hand, although indebtedness to this extent may not exist, and the property of the grantor, not subject to the conveyance, may be enough to pay his debts existing at the time -of the conveyance, it will not necessarily be good. " If," said (a) Thompson v. Webster, 4 Drew., (c) Richardson v. Millard, 1 Madd., 556 ; Be Johnson, 20 C!i. Alliance Bank, 22 Cal., IS") ; Ch., 503 ; Ex parte Mercer, 17 Q. Wilkinson, 5 Yes., 3Si ; Probates (1900), A.

Lord Westbury, C.(a), " the debt of the creditor by whom the

Source page 138

63 Lord Westbury, C.(a), " the debt of the creditor by whom the voluntary settlement is impeached existed at the date of the settlement, and it is shown that the remedy of the creditor is defeated or delayed by the existence of the settlement, it is imma- terial whether the debtor was or was not solvent after making the settlement. But if a voluntary settlement or deed of gift be impeached by subsequent creditors whose debts had not been contracted at the date of the settlement, then it is necessary to show either that the settlor made the settlement with express intent ' to delay, hinder, or defraud creditors,' or that, after the settlement, the settlor had no sufficient means or reasonable expec- tation ofbeing able to pay his then existing debts, — that is to say, was reduced to a state of insolvency (6) in which case the law infers "that the settlement was made with intent to delay, hinder, or defraud creditors, and is therefore fraudulent and void. It is obvious that the fact of a voluntary settlor retaining money enough to pay the debts which he owes at the time of making the settle- ment, but not actually paying them, cannot give a different character to the settlement or take it out of the Statute. It still remains a voluntary alienation or deed of gift, whereby in the event the remedies of creditors are delayed, hindered, or defrauded." "Where the necessary consequence of a voluntary settlement is to delay creditors, it is not clear, whether the settlement is void against the settlor's creditors, as a matter of law though, as a matter of fact, the settlor never had such intention. J., said " If after deducting the property which is the subject of the voluntary settlement sufficient available assets are not left for the payment of the settlor's debts, the law infers intent." But in Ex parte Mercer, Re Wise(d), Lindley, L. J... said that the proposition that a man in point of law must be held to have intended the necessary consequences of his own acts is "to confuse the boundary between law and fact — between consequences which can be foreseen and those which cannot." The language of the Indian Act refers to " the intent to defraud " and it seems therefore more reasonable to say that " the Court is to decide in each particular case, whether on all circumstances it can come to the conclusion that the intention of the settlor in making the settlement, was to defeat, hinder or delay his creditors, "(e) It may however (a) Spirett v.

person. j^jg business in consideration, in part, of an annuity to

Source page 139

IK be that the onus of proving the good faith or otherwise of the transaction may be shifted according as the circumstances afiord prima facie evidence of such intent or not. (a) Although the settlor may be indebted, yet if the debts are secured(6), or if they do not exceed such ordinary debts debts^ ^® every person must incur, as for instance, for ordinary household expenses, and if the settlor has the means of paying them(c), the settlement will not be void, and d fortiori the settlement will be good, if the settlor was solvent at the time he made it.(d) A conveyance, if otherwise within the Statute, will not be Considera- taken out of it merely because the consideration for it is tion paid not for the benefit of the grantor, but of another person. to third Thus, where a person in insolvent circumstances sold person. j^jg business in consideration, in part, of an annuity to his wife, it was held that the wife was not entitled to the annuity "as against her husband's creditors, (e) A voluntary settlement in which fraud is merely presumed, would seem to be void only as against existing creditors(/) ^ta °*^nt ^^* subsequent creditors may sue to set it aside if any of only void the antecedent debtors remain unsatisfied, (p) If it can as agajinst be shown that the settlor, though indebted at the time he existing made the settlement, has since paid every debt, it is difficult to say that he executed it with an intention to defeat or delay creditors, since his subsequent payment shows that he had not such an intention. (^) The question is not what the settlor was possessed of at the time of the conveyances, but rather what property was left after the conveyance and whether it was enough to pay his debts, (i) (a) See Ex jparie Mercer, Be Wise, (/) Kidney v. Coussmaker, 12 Ves., supra ; Grossly v. Westacott, 4 Beav., Eq., 158, Markay v. C, Bom.,1; 3,\so Sadasiv Y.Trimbak, 23 172; Jenkyn v. Vaughan, 3 Drew., Bom., 146; Ebrahimbai y. 481 ; As to subsequent creditors, see (6) Stephens t.

A deed, in fact fraudulent, and executed expressly to hinder

Source page 140

65 A deed, in fact fraudulent, and executed expressly to hinder and delay future creditors, may be impeached by them, though there were no creditors at the date of the deed, Unless or they have subsequently been paid, (a) But if at the date of the settlement, the settlor had ample means, the fact that some years later it has the effect of delaying subsequent creditors is not sufficient to set it aside. (6) It is not necessary that a creditor should have obtained a judgment, lien, decree or charging order ; without any of these he may sue to impeach the validity of a fraudulent conveyance. But he must have obtained such a jxidgment, &c., before he can have execution against the property comprised in the deed.(c) The settlement is only void to the extent necessary to deal with the estate for the satisfaction of the creditors, the cre- ditors ofthe settlor((i), and is good as against the grantor ^°y ^^'^ and his assignees (e), parties who assent to, and concur in, yoid^™^" it(/ ) ; such as volunteers claiming under him, for instance, devisees(g') and strangers. (^) If the property fraudu- lently conveyed gets inseparably mixed up with other assets of the assignee, its equivalent in money will represent it.(z) In all other respects it is good, and will not be set aside merely because it is voluntary. (_7) If the conveyance or settlement be voidable, the voluntary grantee may, before it is avoided, make a valid transfer to a pur- chaser for value. (A:) To avoid a prior conveyance, however, to a volunteer, the subsequent purchase must be for value, and. Subsequent the consideration must not be grossly inadequate, or a pre- purchase sumption of fraud and coUusion will arise, (i) When the must be for conveyance is a mortgage, the voluntary ^^ '^^' subsequent (o) Thomas PiUay v. 33 Mad., 205 (subsequent creditors are (e) Bobinson v. McDonnell, 2 B. & included in the section). See also Be Carter and Hussein Bhai v.

grantees will be entitled, subject to the mortgage, (a) There is an

Source page 141

II. grantees will be entitled, subject to the mortgage, (a) There is an exception to the rule in the case of charities, for a voluntary endowment of a charity will not be defeated by a subsequent conveyance for value. (&) The Indian Insolvency Acts(c) provide for conveyances, in fraud of creditors. A debtor commits an act of insolvency, Indian ^f jjj British India or elsewhere, he makes a transfer of his Ac^ts.'* property to a third person for the benefit of his creditors generally, or with intent to defeat or delay his creditors, or if such transfer would, under anj' law for the time being in force, be void as a fraudulent preference if he were adjudged an insolvent. Every transfer of property or of any interest therein, every pay- ment made, every obligation incurred, and every judicial proceeding taken or suffered by any person unable to pay his debts as they become due from his own money in favour of any creditor, with a view of giving that creditor a preference over the other creditors, shall, if such person is adjudged insolvent on a petition presented within three months after the date thereof, be deemed fraudulent and void as against the receiver and shall be annulled by the Court. The rights of any person who in good faith and for valuable consideration has acquired a title through or under a creditor of the insolvent are not affected. Any transfer of property not being a transfer made before and in consideration of marriage or made in favour of a purchaser or incumbrancer in good faith and for valuable consideration shall, if the transferor is adjudged insolvent within two years after the date of the transfer, be void against the receiver and may be annulled by the Court, ((i) To constitute a fraudulent preference, two things must concur — 1st, the act of preference must be voluntary on the part of the debtor ; 2ndly, it must have been done by him when in such a state of insolvency, as that, it may or must be inferred, that bankruptcy was then in his consideration. And therefore when an assignment or conveyance is made by a debtor to a creditor upon the demand of the latter for payment or security, it will not be fraudulent, (e) (a) Hales v.

The 5th section of the Statute 27 Eliz., cap. i, relates to

Source page 142

67 The 5th section of the Statute 27 Eliz., cap. i, relates to conveyances with power of revocation and its provisions convevances have been re-enacted in India. The Transfer of Property with power Act (s. 42) declares that " where a person transfers any o' revoca- immoveable property, reserving power to revoke the *'°"" transfer, and subsequently transfers the property for considera- tion to another transferee, such transfer operates in favour of such transferee (subject to any condition attached to the exercise of the power) as a revocation of the fornaer transfer to the extent of the power." (a) It avoids the first conveyance, though to a purchaser for value(6), and cannot be evaded by making the exercise of the power apparently conditional, as that the consent of a statute* third person appointed by the grantor shall be obtained, (c) The reservation of an unlimited power of leasing is in effect a general power of revocation, (ti) So, a power to mortgage, unless it be limited to a specified sum upon an estate of much greater value, (e) A settlement with power of revocation is void as against a subsequent purchaser, although the settlor has released or extinguished the power previously to the sale (/) ; unless the release was for value, the settlement containing the power being also for value, (gr) Conveyances or settlements will not be void as against pur- chasers or creditors if supported by a valuable considera- tion, except in cases where a power of revocation is reserved Valuable the settlor ; the mere quantum of consideration is in ji°„ ' ^'^^' to general not material. (A) Marriage, according to English law, is a valuable consideration, and will support a settlement (^), though, as a genei;al ^^^^^-^^^ ^ rule, a settlement after marriage even upon a wife or children is voluntary, there being merely a moral consideration which will not support a promise or settlement.( j') But an additional portion received by the wife after the marriage will support a post-nuptial settlement on her and her children, (fc) (a) See also Indian Trusts Act, {g) Sug. Bullock, SB,eT[>.,S2, b ; («) Ford v. Thompson, 4 D. & J., 661. (d) Lavender v. Crofton, 3 J. & Lat., (e) Jenkins v.

to show con- consideration, for the consideration need not actually

Source page 143

68 EVIDENCE TO PEOVE CONSIDERATION. [LeC. A release by a wife of the past income of property settled to her separate use, or her concurrence in a particular settlement(a), or the release of her iointure(6), or right of dower(c), or a charge by her upon her own estate((Z), or even the permission to marry a second wife(e) will support a settlement by her husband. So the payment of the settlor's debts by a third person is a good con- sideration fora settlement upon his wife and children(/), and a loan to him will be a good consideration for a settlement upon himself for life with remainder to his children. ((7) So if a person incur expenses on the faith of a settlement, and in addition enters into a covenant to indemnify the settlor against certain incumbrances, there will be a good consideration for a settlement, (fe) The release or surrender of a voluntary bond is a good con- sideration tosupport a substituted bond, unless with a fraudulent design, as by an insolvent to substitute an available security for one that could not avail against creditors, (i) Settlements founded upon immoral considerations are of course void. A settlement in form voluntary may be shown from extrinsic Extrinsic evidence to have been made for valuable consideration. (j ) evidence And, if necessary, an inquiry may be directed as to whether admissible the settlement was founded on any and what valuable to show con- consideration, for the consideration need not actually sideration. ,7» ■' appear, (k) In Bayspoole v. Collins{l), the owner of property, which was worth, beyond an incumbrance to which it was subject, about £1,300, was persuaded by A, a relative of his wife, to make a post- nuptial settlement of it on his wife and children. As an inducement to do this, A lent him £150 on his promissory note.

£150. It was held, that the loan was a suflScient valuable consider-

Source page 144

It was held, that the loan was a suflScient valuable consider- ation to support the settlement against a subsequent mortgagee of the settlor. A conveyance to a trustee in trust to pay the debts of the grantor, although it may be void as regards them, will, never- theless, entitle the assignee to take proceedings against persons in possession of the property which is assigned, (a) AVhere a settlement or conveyance, whether by transfer of property or declaration of trust respecting it, is effectual, g ... and not open to objection upon any of the foregoing not set aside grounds, the grantor cannot avoid it, nor will the Court set as against it aside. Although the Court will not assist the completion g'^^ntors. of voluntary deeds, it does not lay down, as a rule, that they are always void ; the mere alteration of intention is not sufficient to induce the Court to interfere and cancel an instrument which was fully understood and deliberately executed by the grantor. (6) And a settlement will not be revoked though the trustees of the property re-convey it to the grantor(c), in which case they will be guilty of a breach of trust. (^) So the settlement will remain in force, though the settled property may come back into the hands of the settlor, (e) In Forshaw v. Welshy(f ) il was held, that a voluntary settle- ment containing no power of revocation, made by a person y j ^^ in expectation of death, ought to be set aside at his instance, settlement as it was not intended to be operative in the event of his in expecta- recovery. Each case, however, must depend upon its own j'""!^^ circumstances. The absence of a power of revocation in voluntary settlements is an important circumstance in consider- ing them.

'" '"^' persons claiming under them though for value,

Source page 145

II. the settlor, except where the settlement contains provisions so- absurd and improvident that no reasonable person would have- consented to them or where the beneficiary occupied a fiduciary position towards the settlor at the date of the settlement, (a) The Court will not rectify a voluntary settlement at the . instance either of the grantor or of the grantee, unless. setOement there has been a mistake common to all parties(&) : and where it does not express the intention of the parties,. and is impeached, it cannot be reformed except with the consent. of the donor, (c) The mere retention of the instrument of settlement or gift by the settlor is immateiial, if there is nothing to show that th& settlor did not intend it to operate immediately. ((^) So is its destruction and the non-communication of its con- tents to the trustees or cestui que trust{e), and if found Enforce- cancelled among the papers of the grantor after his death, it will be enforced against his representatives upon the pre- sumption that it was improperly cancelled. (/) An instrument vesting property in trustees for the benefit of the grantor for his life, and after his decease, for the benefit of other persons, with a power of revocation, is valid, and is not testamentary. (^) A settlement complete and vahd, having regard to the above- mentioned rule, is binding on the settlor or grantor, and On whom ^^ Yds heirs and legal representatives and devisees(^), and '" '"^' persons claiming under them though for value, (t) - A person who takes by title paramount to the settlement,, and does no act to repudiate it, will, in general, be considered to have acquiesced in it.(j) (a) Duiton v. MuHings, 7 Ch., 244. (e) PhilUpson v. Kerry, 32 Beav., The contrary rule laid down in the last 628. edition on the authority of Coutts v. (d) Doe v. R., 8 Eq., 558, Wollaston (e) Fletcher y. R., 10 Eq., 405, must be (/) Sluyskenv. Hunter, I Mer., 40. taken to have been definitely overruled. (g) Thompson v.

All who claim under the instrument of trust are entitled to

Source page 146

II.] REVOCATION OF CREDITORS' DEEDS. 71 All who claim under the instrument of trust are entitled to the benefit of it, and a settlement in favour of unborn children is, according to English law, binding and irrevocable unless a power of revocation be reserved, (a) A question frequently arises how far deeds for the payment of creditors are revocable. As to this it has been held, _ ... , that a conveyance for the benefit of creditors is revocable deeds how if it has not been communicated to them(6), but not if com- far revoc- municated to them, or some of them, and they assent to ^'''^■ it.(c) A conveyance even to one creditor in trust for himself and others cannot be revoked after it has been communicated to him unless he has dissented. ((?) The principles applicable to creditors' deeds were fully dis- cussed bythe Lords Justices in the case of Johns v. The statement of claim contained no allegation that the assignment had been communicated to the plaintiff. It was held by the Vice-Chancellor, and it has been affirmed, that really after all that is only making those particular persons who are called trustees his agents or attorneys. If it were supposed that such a deed as that created an absolute irrevocable trust in favour of every one of the {a) Petre v.

persons who happened at the time to be a creditor, the result

Source page 147

72 REVOCATION OF CREDITORS' DEEDS. [LBC II. persons who happened at the time to be a creditor, the result might have been very often monstrous. It would give him no opportunity of paying a creditor who was pressing ; no J es'' opportunity of settling an action ; no opportunity of getting any goods for himself or his family the next day, or redeem- ing property pledged. Coutts{a), that where it was for all the creditors, it must be assumed from the very nature of the transaction, and from the position of the assignor, that it was a thing for his own benefit, and not for the benefit of numbers of persons whom the trustees would probably have no means of ascertaining, and whose debts the trustees would probably have no means of knowing. If you once assumed that this was an absolute trust in favour of every creditor, every person who had a right to claim to be a creditor, or had some demand against him, everyone of those might have filed a bill, and the unfortunate trustee under those circumstances (who might have acted the part of a friend to the impecunious person) might have been liable to a thousand bills in Chancery, for he could not stop any of them until a decree was made in favour of all the creditors. Those are some of the reasons that appear to me to have led the Court to say that such a deed as this is to be construed as a mandate, the same sort of mandate that a man gives when he gives his servant money, with directions to pay it in a particular way ; it does not create any equitable or legal right in favour of a particular creditor. The right to the direction of the money is the right of the person who has put the money in the hands of his agent or steward, or whoever he may be.

person or persons to whom no such communication has been made.

Source page 148

II.] RETOCATION OF CKEDITORS' DEEDS. 73 person or persons to whom no such communication has been made. It seems to me that on principle you cannot create a right in A where the deed has not given him a right, because something has occurred giving B a right, who originally was in the same position as A. That was in fact the principle of the decision in Acton v. Woodgate{a), for in that case there being beyond all question a trust-deed in favour of all the creditors, including certain post obit creditors, whom the settlor was afterwards minded not to put on the same footing as his other creditors, the settlor directed that they should be excluded from the benefit of the deed ; and it was held by the Court that it was perfectly in his power to do so, and the deed remained still as a deed to be executed in favour of all the creditors except the post obit creditors, and they 'were not cestuis que trustent by the deed. Lord Lauderdale{c), viz., the case of a creditor to whom no communication has been made, who. has never been induced to act by any thing that occurred by reason of the execution of the deed."If the deed has been communicated to the creditors and acted upon, it would make them cestuis que trustent and the deed irrevoc- able, (d) Where the object of the debtor was not to provide for payment of debts generally but to shield himself from the conse- quences ofbreaches of trust(e), or where the deed is applicable only to a particular class of persons and not to all creditors gener- ally(/ ), or where the deed provides for payment of the settlor's debts at his death with remainders over(p), the doctrine of revo- cabUity laid down in Garrard v.

74 TRUST BY WILL FOR PAYMENT OF DEBTS. [LCC. II»

Source page 149

74 TRUST BY WILL FOR PAYMENT OF DEBTS. [LCC. II» If a time be limited for the execution of tlie deed by the creditors, those who refuse to execute it will be excluded of'deedb" ^''^^^ ^^ benefits, (a) So if they claim adversely to it(6), or creditors?' ^ct inconsistently with it.(c) And a creditor cannot be said to have acceded to the provisions of a composi- tion-deed unless he has put hinaself in the same situation with regard to the debtor as if he had actually executed the deed.(«?) But mere delay in executing the deed by creditors who never- theless act under it will not disentitle them to participate in its benefits(e), if,they do eventually execute the deed or show in some way that they accept it.(/) A creditor having security, who assents to, and executes, the deed, which contains a release by the creditors of the debts due ta them, must share rateably with the other creditors and give up his security, unless the deed provides for his retaining it.(g) A trust by will for the payment of the debts of a third person Trust by ^^ *^® discretion of trustees applies, it has been held, will for for the benefit of creditors subsequent to the death of the paymentdebts. of testator. (A) A debt barred by limitation will not be revived by a direction to pay debts(i) ; but if not barred at the date of the deed or time of the death, the trust will pre- vent the operation of the Statute afterwards.( j) A trustee of an estate devised for payment of debts, although he is executor, has no right of retainer, but must share rateably with the other creditors, (fc) [a) Johnson v. As to the case of a creditor having the 369. security of a surety, wlio himself holds Dr. (c) Field V. Lord Donoughmore, 1 security of the debtor, see Midland & War., 227. Jones, 2 V. & B., 275 ; (e) Nicholson v.

LECTURE III.

Source page 150

Section 84 — 85 — Trust to sell

Implied Trusts — Precatory Trusts — Objects, property, and trust must be described — Words of recommendation and entreaty — Intention to give absolutely — Intermediate class of cases — Maintenance — Property acquired with notice of existing trust : Indian Trusts Act, s. 91 — Agreement to settle property — Vendor trustee for vendee — Resulting Trusts — Undisposed of interest : Indian Trusts Act, a. 83 — • Excluding heirs — Parol evidence to rebut presumption — Illegal purpose : Indian Trusts Act, ss. 84-85 — Trust to sell — Trusts vague : No trust declared — Trust declared of part only of estate — Transfer of stock or money into name of another — Purchase in name of trustees — Purchase in name of stranger — Expression of wish — Delay — Rule applies to joint purchase — To personal as well as real estate — Purchase in fiotitioiis name — Parol evidence admissible on part of person paying purchase-money — Parol evidence on behalf of person to whom conveyance made — To rebut pre- sumption asto part of the property — Statute of Frauds — Conveyance to stranger without consideration — Purchases in the name of a wife or child no resulting trust — Reputed wife — Person in loco parentis — Purchase by a mother — Purchase in name of nephew — Fiduciary relationship — Pur- chases void as against creditors — Rules apply to personal estate — Surround- ing circumstances to be considered — Purchase-money unpaid — Joint tenancy when created — Purchase in the name of a child and a stranger — Evidence to rebut presumption of advancement — Subsequent acts and declarations — Possession by father — Dividends received by father — Devise, bequest, or lease — Child fully advanced; Hitherto we have dealt with express trusts only. A person, however, may show an intention to create a trust, and this will be carried out by the Court by means of an implied xTusts. trust. The general rule as to implied trusts is thus laid down by Mr.

coiifides(a), or trusts and confides(6), liopes(c), doubts not{d),

Source page 151

III. coiifides(a), or trusts and confides(6), liopes(c), doubts not{d), recominends(e), we]lknows(/), entreats(5'), desires(A), or wills and desires(t), requests(y), or wishes and requests(/(;), or requires and entreats(Z), wills(m.), wishes and desires(ra), most heartily Ibeseeches(o), orders and directs(p), authorizes and empowers(g'), is well assured(r), has the fullest conMence(s), trusts(«), well knows(M), has full. assurance and confident hope(«), is under the firm conviction (w), or in the full belief (a;), or expresses his belief, that the legatee will give{y) the property in a particular manner. In such cases the Court will enforce the implied trust in favour of the person named or indicated(z), and compel the person in whom the confidence is reposed to give effect thereto, (aa) ^ert^'^*and'° "^^^ property must be described with certainty. (66) trust must ^^^ ^^® objects, property, and way in which it shall go be described, must be pointed out. (cc) (a) Griffiths v. Nottige, 2 J. & H., 766. (o) Merediths. Cox, 1 Ke., 317 ; Palmer (p) Cary v. Cary, 2 Sch. & Lef., V, fiimnionds, 2 Drew., 224 ; Macnab v. Whitbread, 17 Beav., 299 ; Pilkinglon (g) Brovm v.

For instance, a bequest of property to a certain person " hoping

Source page 152

77 For instance, a bequest of property to a certain person " hoping that he will continue it in the family," does not create a trust, as the beneficiary is not indicated with reasonable certainty. (a) So, for the same reason, a bequest to A requesting him to distribute it amongst such members of B's family as B shall think most deserv- ing, does not create a trust. (6) Again, a bequest to A desiring him to divide the bulk of it among B's children, does not create a trust, for the trust-property is not indicated with sufficient cer- tainty(c) ; and a bequest of a shop and stock-in-trade to A on condition that he pays the testator's debts and a legacy to B, is a condition and not a trust for the testator's creditors and B.(d) So also a direction to remember certain persons without specifying any sum or property(e), or to make ample provision for them(/ ), to give what shall remain at the legatee's dea.th.(g), or to divide and dispose of the savings(A), to consider certain persons(i), or to be kind to them (J ), will not create a trust. Such words and expressions, however, as have been mentioned particularly w"here they indicate recommendation or en- ■„, . , treaty, are of a flexible character, and will not create a trust, recorn-° if that is inconsistent with other positive provisions in the mendation will.(fc) And words of expectation do not amount to a andentrea- recommendation, and do not create a trust. (Z) ^' If it is clear that the aiithor of the trust intended that the devisee should take absolutely, precatory words will not cut down the absolute gift, and create a trust ; they are Intention then regarded merely as the expression of a wish.(m) Thus solutely^''" where property is given to A for his own use, benefit, and disposal absolutely, the author of the trust nevertheless conjur- ing(w), desiring(o), or recommending(j3) him to make a particular disposition, no trust will be created, (g') (a) Harland v. Oglander, 34 Beav., 513 ; Scott White V. R., 2 Eq., 51. {d) Messenger v, Andrews, 4 Buss., {I) Lechrmre v. Brution, 14: Sim., S^9 ; also Comiskey v. Fox, 27 Beav., 301 ; see also Re (1905), A.

[Lec. III.

Source page 153

If a testator has, by his will, recommended or desired that a particular person shall be employed as an agent or manager of an estate, or the like, this will not in general impose a trust or oblii^a- tion upon the devisee of the estate, (a) There would seem to be an intermediate class of cases between liiterme- those in which the Court holds that a trust has been diate class created and those in which it holds that it has not been of cases. created. Thus there may be an absolute gift subject only to the performance of a particular trust, and the Court may look dehors the will to see what the trust is. Sullivan (b) the testator bequeathed his property to A absolutely, trusting that she would carry out his wishes, but there was no further reference to them in the will. A had w'ritten down what the testator desired to give to various persons ; but the paper had not been seen by the testator. It was held that A took beneficially subject to the performance of the testator's wishes, (c) The tendency of modern decisions leans against the conversion of legatees into trustees, on the construction of precatory expres- sions, (c?) The doctrine of precatory trusts is not abolished, but the courts do not imply a trust unless the will shows a clear intention to impose an obligation on the legatee, (e) Occasionally the trusts of a will with reference to the mainten- ance of children are so ambiguous that it is doubtful Mainten ance. whether the testator meant to create a trust, or merely to indicate the motive of the gift. Thus, if a legacy be given to a father that he may support himself and his children(/ ), or better to enable him to provide for his children(^), or to assist his children or the like(A), or if a legacy be given to A to maintain and bring up B(i), the gift is absolute without any trust or obligation being imposed on the legatee.

lee. III.] TRUST FOR MAINTENANCE.

Source page 154

But a bequest of the income of propertj' that the legatee may use or dispose of it for the benefit of himself and the maintenance and education of his children, in general, creates a trust, not exclusively, however, for the children, but for the parent and ■children. (a) The trust is imperative to this extent, that the parent must perform the obhgation : Provided he does this, he may retain any surplus beyond what is required for this purpose, ior himself, and is not bound to account for the application of the fund. (6) But faiUng in the performance of the trust he will not be allowed to receive the income. (c) Where there is a bequest of a fund to A for the maintenance of her children, and there are none, she will herself be entitled to the income. (c?) So also if they have since died.(e) The obligation to maintain the children, if there are any, will not be at an end when they attain twenty-one or marry. Whether it would, if they ceased to reside under the parent's roof, is doubtful. (/ ) The cases on this point are conflicting. (51) But an annuity given to children for their mainten- ance and education endures during their lives and does not cease with minority. (^) In Scott V. Key(i), under a bequest to the testator's widow to be at her sole and entire disposal for the benefit of herself and children, it was held, that the trust for maintenance did not cease absolutely on a daughter, an only child, attaining twenty-one and marrjdng ; but that on her becoming a widow and requiring maintenance, she would be entitled to it. A direction that A shall reside with and be maintained by B, will not be enforced as a trust in the event of A not choosing to reside with B, and although A may reside with B, the trust will terminate at the death of the latter. (j ) Where an annuity was given to the testator's widow (in addition to another provision for her) as long as she and her son should live together, but if they ceased to live together it should cease, it was held that the annuity did not terminate upon the son's death in the widow's lifetime, (/fc) There are cases, however, somewhat varying in terms from .those just [a) Woods V. Blackburn, 26 Beav., 41. (g) See also Bowden v. Living, 28 Beav., Briant, 2 Dr. & Sm., 1 ; Bird v.

Property Under the Indian Trusts Act, " where a person

Source page 155

Section 91 — the extent necessary to give effect to the contract "

III. noticed in which the Court has come to the conclusion that the trustee or parent was not intended to take any interest ; as if there is a gift to A to dispose of among his children(a), or the better to enable him to maintain his children until their shares should become payable. (6) Again, the terms of the bequest may show that the parent or trustee was intended to take jointly, or in common, with the other objects of the trust, as where a fund is given to a parent with her children for their joint maintenance. (c) And where the bequest was to the testator's wife for the use and benetit of herself and all his children by her, or by a former wife, it was held that "the widow and children took as joint tenants, (d) In some cases it has been held, that where there is a gift to a parent to be disposed of for the benefit of himself or herself and children, the parent takes an es- tate for life with a power of disposition in favour of the children. (e) But this cannot be relied upon as a general rule. Where a testator gave a house and all his estate to his widojv^ " to be at her disposal in any way she may think best for the benefit of herself and family," and the widow gave part to an illegitimate son of one of the testator's children, the gift was held valid. The Lords Justices without absolutely deciding the question, seem to have had little will.(/)or no doubt that no trust at all was created by the testator's Property Under the Indian Trusts Act, " where a person acquired acquires property with notice that another person has with notice entered into an existing contract affecting that property, °^ ^J^act"^ °^ which specific performance could be enforced, the former Indian Trusts must hold the property for the benefit of the latter to Act, s. 91. the extent necessary to give effect to the contract ". An implied trust will arise when a person agrees for valuable A eement consideration to settle certain property, whether moveable to^settle or immoveable((;), and the property may be followed into property. the hands of a third person. (A) (a) Blakeneyv. Blaheney, 6 Sim.., 52. (/) Lambe v.

So if a person enters into a valid contract for the sale of pro-

Source page 156

81 So if a person enters into a valid contract for the sale of pro- perty, heis from that tinae a trustee of the property for the purchaser, and must account for the rents and profits, and Vendor will be liable in damages if he neglects the property, for vendee, being a trustee he is bound to take care of the trust- estate, and commits a breach of trust if he does not do so. (a) The next class of trusts to consider are those created by operation of law. These again may be sub-divided into resulting trusts and constructive trusts. (6) I will first deal j^^su^^ting with the rules of English law as to resulting trusts, and then with benami transactions. When the instrument creating the trust, whether a deed or will, does not direct how the whole of the property, made subject to the trust, is to be disposed oAnterest'' of, the undisposed of interest results to the settlor or his heirs or representatives, (c) If a will fails to make an Act'^" 8^"*** effectual and complete disposition of the whole of the testator's real and personal estate, the undisposed of interest devolves iipon the person or persons on whom the law, in the absence of disposition, casts that species of property, (li) So on the same principle, where lands are devised upon particular purposes, as for payment of debts, or with a direction to pay to A for life, and no further trust is declared, all the unexhausted beneficial interest results to the heir. This doctrine is so well settled, that if the character of trustee be plainly and unequivocally affixed to the devisee, no question can be raised respecting its application ; but the difficulty in these cases generally is to determine whether it is intended that the interest in the land beyond the purpose to which it is devoted shall belong to the devisees in a fiduciary character, or for their own benefit, (e) (a) Acland v. Gaisford, 2 Madd., 32 ; beneficial interest is a resulting trust in Wilson V. Clapham, 1 J. and W., 38 ; favour of the testator's heir ; or, 2.

Where the whole legal interest of a grantor is given for the

Source page 157

Where the whole legal interest of a grantor is given for the purpose of satisfying trusts expressed, and those trusts do not in their execution exhaust the whole, so much of the beneficial interest as is not exhausted results to the grantor or to his heir or legal personal representatives. But where the whole legal interest is given for a particular purpose, with an intention to give to the grantee of the legal estate the beneficial interest, if the whole is not exhausted by that particular purpose, the surplus goes to the grantee, and there is no resulting trust. Thus, a devise to A and his heirs charged with the testator's debts is a beneficial devise, subject to a particular purpose, and there will be no resulting trust ; but if the devise is upon trust to pay debts, that being a devise for a particular purpose only, a trust will result for the heir, (a) In Lallubhai Bapubhai v. J., said : " Where there is a devise upon trusts which do not exhaust the property devised, the mere conferring of a legacy, or other benefit, upon the heir does not prevent there being a resulting trust of the residue for him, unless there be other circumstances sufii- ciently strong to turn the scale in favour of the devisee. " On the same principle the mere gift, by a testator, of an annuity to his wife has been held not to be sufficient without other circumstances demonstrative of his intention that she should not have both it and dower, to induce the Courts in England to put her to her election between the annuity and dower. Even where there is an expressed intention to exclude the next-of-kin from the residue of personalty, or the heir from the residue of realty, there must be a distinct devise away from them, otherwise there will be a resulting trust in their favour." In order to exclude the heir, the intention of the grantor to exclude them must be apparent ; mere conjecture(c) or heirs" "^ the fact that legacies have been given ((?) will not be sufficient, (e) The trust results, not on the ground of intention, but because the ancestor has declared no inten- tion.(/) Even where there is an expressed intention to exclude the next-of-kin or heir, there must be a distinct devise away from them, otherwise there will be a resulting trust in their favour, (gr) (a) King v. Denison, 1 V. & E., 272, (e) King v.

sumption.

Source page 158

83 Parol evidence is admissible to rebut the presumption „ of law in the case of an instrument made inter vivos, and dence to to show the settlor's intention to give the surplus interest rebut pre- sumption. beneficially.(a) Under the Indian Trust Act, " Where the owner of property transfers it to another for an illegal purpose and such purpose is not carried into execution, or the transferor is purpose, not as guilty as the transferee, or the efEect of permitting. Indian Trusts the transferee to retain the property might be to defeat ^'^'' ^^- ^4— the provisions of any law, the transferee must hold the property for the benefit of the transferor. (&) Where a testator bequeaths certain property upon trust and the purpose of the trust appears on the face of the will to be unlawful, or during the testator's lifetime the legatee agrees with him to apply the property for an unlawful purpose, the legatee must hold the property for the benefit of the testator's legal representa- tive." If property is assigned for an illegal purpose, which is not <;arried into effect, and nothing is done imder it, the mere, intention to effect an illegal object when the assignment was ■executed, does not deprive the assignor of his right to recover the property from the assignee who has given no consideration for it.(c) Where estates are devised to executors upon trust, to sell and to invest part of the proceeds of the sale for a particular purpose, but no trust is declared of the sum so reserved ™^ after the purpose is satisfied, there will be a resulting trust for the heiv.{d) Under a devise of all the residue of the testator's estate and ■effects whatsoever, and wheresoever, of what nature or kind soever, to trustees upon trusts applicable only to personal property, the real estate will pass with a resulting trust for the heir.(e) But if the trusts may be applicable to real estate, then the real estate will pass.(/) (a) Fowhes v. As to admission of parol evidence 33 M. J., 696. in case of wills, see Lewin, 12th Ed., (d) Stonehouse v. Turner, 20 Beav., 557. (c) Syrms v. R., 18 Eq.,Gh., 469; 114 ; 458;Eq., 133.Longley v.

t^ust shows that it was not intended that the grantee

Source page 159

If the trusts declared are so vague that they cannot be executed(a), or if they lapae(6), or are void because of unlaw- fulness(c), or if property is devised on trusts to be thereafter declared, and no declaration is made(d), a trust will result. So also a trust will result when the instrument creating the t^ust shows that it was not intended that the grantee Trusts vague No trust should take beneficially, as where the conveyance, devise declared. or bequest is to A " upon trust," and no trust ia declared, (e) If a trust is declared of a part only of an estate, whether by conveyance, inter vivos, or by will, the undisposed of Trust de- clared of interest results to the grantee or testator, or his heirs or part only of estate. representatives.{/) According to English law, the undis- posed-of residue, in the case of personalty, vests in the executors beneficially. But that rule does not apply to Hindus. (^) A trust will result where stock or money is transferred to Transfer of another, unless it can be inferred from the surrounding stock or circumstances that a gift was intended(fe) ; and where money into the transfer is into the joint names of the grantor name of another. and grantee, the grantee will have a beneficial interest for life.(i) No trust will result where a person invests money in the Purchase names of the trustees of his marriage-settlement, the pre- in name of sumption being in such cases that he intended to benefit trustees. the persons interested under the settlement, (j) Though cestuis que trustent may claim the whole of an estate which is wholly purchased out of trust-moneys, they can, if the estate be only partially purchased with trust-money, claim only a (a) Stubbs V. Sargon, 2 Keen., 255 ; Fewkes, 2 H. & M., 60 ; Ee Sinclair 3 M. & C, 507 ; Williams v. Kershaw, (1903), W^ N., 113; Kirby-Smith v. Nodd {1886), Parnell (1903), 1 Ch., 483.

Lee. III.] PURCHASE in name of steangee. 85

Source page 160

III.] PURCHASE in name of steangee. 85 charge for the amount of the trust-moneys employed in the trust, (a) Where property is bought by one person in the name of a stranger, to whom the conveyance is made, there wUl be a resulting trust for the person who paid the purchase- in^name^of money. " The clear result of all the cases," said Eyre, stranger., C. B.(6), " without a single exception, is, that the trust of a legal estate, whether freehold, copyhold, or leasehold ; whether taken in the names of the purchasers or others jointly, or in the names of others without that of the purchaser ; whether in one name or several ; whether jointly or successive, results to the man who advanced the purchase-money. This is a general proposition supported by all the cases, and there is nothing to contradict it ; and it goes on a strict analogy to the rule of the common law, that where a feoffment is made without consideration, the use results to the feoffor."(c) The person who advances the money must do so in the character of purchaser. ((Z) No resulting trust will be created by the mere expres- Expres- sion]of a wish on the part of the grantor, that the purchase- sion of money may be applied in a certain way.(e) ^'sh. The rights of a purchaser may be barred by negli- ^ , gence or delay.(/) The rule that a trust results for the person who pays the purchase-money applies to the case of a joint purchase in the name of one. Plumer decided that a resulting trust arose upon a joint advance, the purchase being taken'in the name of one. (o) Lane v.

" Lord Hardwicke," said his Honour, " could not have used the

Source page 161

III. " Lord Hardwicke," said his Honour, " could not have used the language attributed to him. What is there applicable to an advance by a single individual, that is not equally applicable to a joint advance under similar circumstances ? "(a) The foregoing doctrines apply as well to personal as to real To personal estate(&), even though when the property consists of shares, as well as in a company, the rules of the company provide that there real estate. shall be no benefit of survivorship. (c) Where money has been invested in the purchase of stock in a fictitious name, for the purpose of defrauding creditors, the Purchase Court will order the fictitious name to be erased and the in fictitious stock to be transferred to the person who paid the purchase- money. (eZ) Where an intestate had - executed transfers of railway shares and stock to a fictitious person, the Court, in a suit by his administrator, declared that the intestate used the fictitious name as another designation of himself, and that the plaintiff, as administrator, was entitled to a transfer of the sharea and stock in question, and to receive the dividends thereof, (e) Parol evidence is admissible on behalf of the person paying Parol evi- the purchase-money to show that it belonged to him. dence ad- missible on In Sir John Pechy's Case(f), SirE. R., laid it down, that if A sold an estate to C, and the consideration part of per- son paying was expressed to be paid by B, and the conveyance purchase- made to B, the Court would allow parol evidence to prove money. that the money was paid by C.{g} But such parol proofs must be very clear. (^) Parol evidence is admissible on behalf of the person to whom the conveyance is made, to rebut the presumption of a Parol evi- dence on resulting trust for the person paying the purchase-money. behalf of In Beechsr y. Major{i), A purchased and transferred person to £1,000 stock in the name of her niece, and wrote her a whom con- letter, saying that she had done so, and that she intended it veyance made. for the niece's benefit ; and in the letter A enclosed a bank- power, which she stated was to enable her to receive the (a) As to contribution, see Lewin, (d) Green v. Banh of England, 3 Y. & 12th Ed., 185. Wms., 607 ; Mor- pany, 3K. & J., 204. timer V.Davies, 10 Ves., 363 ; Rider v.

dividends for her life, which power she requested the niece to

Source page 162

87 dividends for her life, which power she requested the niece to execute and return to her, and also to destroy the letter, both of which the niece accordingly did. It afterwards turned out that the bank-power authorized A to sell out stock as well as receive the dividends. It appeared that A had always been very kind to the niece, and by her will, made before the transfer, had given her an annuity of £30. It was held that parol evidence of the contents of the letter was admissible to rebut the presumption that the stock still belonged to A. (a) Parol evidence is admissible for the purpose of rebutting the presump- pr°esumption tion of a resulting trust as to a part as well as to the as to part of whole of the property. (&) t^e property. Parol evidence is equally admissible to show that, where land has been paid for by one person, the purchase was made on behalf of another. Although the seventh section of the 1^^*^^* °^ Statute of Frauds requiring declarations of trust to be in writing may be considered to be in force in any Presidency- town(c), the statute " was not made to cover fraud " and does not prevent the proof of a fraud. " The principle applies not only where the trustee, whose conscience is afEected, is the defendant, but also as against volunteers or creditors claiming under him."(d!) So where there was an assignment of an agreement for a lease apparently absolute, but with an arrangement that a part of the premises was to be held in trust for the assignor, the trust was allowed to be proved by parol evidence, (e) In some cases it has been held, that where a conveyance is made to a stranger without any valuable consideration _ being expressed, then a resulting trust arises for the gran- to stra^^r^ tor.(/) In Young v.

child ; no the names of husband and wif e(g!), nor upon a purchase

Source page 163

III. that a trust shall arise by implication ; but that is by no means the rule of the Court, (a) Trusts by implication, or operation of law, arise in such cases, where one person pays the purchase-money, and the conveyance is taken in the name of another, or in some other cases of that kind ; but the rule is by no means so large as to extend to every voluntary conveyance. "(6) Where a son conveyed an estate to his father nominally as purchaser, but really as a trustee, and in order that the father, who was in better credit than the son, might raise money on it by way of mortgage for the use of the son, and the father died shortly afterwards, and before any money was raised, having by a will subsequent to the conveyance made a general devise of all his real estates, it was held that the case was within the Statute, and that parol evidence was not admissible to prove the trust ; but that the son had a lien on the estate as vendor for the apparent consideration, no part of which was paid.(c) In Heigh v. Kayeb{d), however, the rule that the statute cannot be used to cover a fraud was applied under similar circumstances and parol evidence was admitted, so that the view in Leman v. Whitley is now considered as over- ruled, fe) in the^name ^° resulting trust arises upon a purchase in the of a wife or name of a wife alone. (/) Nor upon a joint purchase in child ; no the names of husband and wif e(g!), nor upon a purchase resumng -^^ ^^^ ^^^^ ^^ ^ child. (A) If a mortgage is made in the joint names of a husband and wife, this will be considered as being in the nature of a joint pur- chase, and the wife will, if the husband dies, be entitled to the mortgage-money by survivorship, (i) A purchase in the name of the purchaser and of a woman with whom he has gone through the ceremony of marriage, but wife. ^ ^^o could never become his lawful wife, does not come within the rule, and therefore such a purchase will not (a) See Fordyce v. Andrews, 2 Vern., 120 ; Christ's C, 577. Budgin, 2 Vern., 683 ; Rider (b) And see 1 Sand. P., 10th Ed., 159 ; Gosling, 3 Drew., 335 ; Lloyd v.

xaise a presumption that it was intended as an advancement or

Source page 164

III.] PURCHASE BY MOTHER, 89 xaise a presumption that it was intended as an advancement or provision for her. (a) The presumption of advancement may arise in the case of a purchase by a person who has placed himself in loco parentis to the person in whose name the purchase is made. Thus locoVarm- the presumption has been held to apply in the case of an tis. illegitimate son. (6) But the presumption of advancement will not arise in the case of a purchase in the name of an illegitiinate grand-child, ■although the grandfather has placed himself in loco parentis to the child, (c) In the case of De Visrm{d), it was said that a mother does not stand in such a relationship to a child as to raise a presumption of benefit for the child. JIughes{e), a mother, after making her will in favour of her two daughters, transferred stock, which had stood in her own name, into the names of herself and one of the daughters, -and died. It was held, that there was a presumption of intended benefit to the daughter which was unrebutted, and that the ^tock belonged absolutely to her. Re De Visme(f) was cited as an authority for the proposition, that there could be no presumption of advancement as between a mother and child ; but Stuart, V. Where stock was transferred by a mother into the names of herself, her daughtei:, and the daughter's husband, and the dividends on the stock were received by the son-in-law and paid over to the transferror during her life, and the mother died leaving the son-in-law only surviving, it was held, that there was no resulting trust, and that the son-in- law was entitled to the stock, the Court being of opinion that the evidence showed that the mother intended to create a beneficial interest in each of the three persons into whose name the stock was transferred. (A) The rule does not, however, apply to a step- mother, (t) (o) Soar V.

Purchases Purchases in the name of a wife

Source page 165

Where a fiduciary relationsliip, such as that of solicitor and client, subsists between a parent and child, and the parent's relati^on'^^ money is advantied by the child in her own name, the ship. ordinary presumption in favour of the transaction being a gift, is excluded, and the onus is thrown upon the child of proving that a gift was in fact intended, (a) Purchases Purchases in the name of a wife or child by way of against o"*' or advancement, are, it appears, within the 13 Eliz.^ creditors. c. 5, and may be avoided as against creditors. (6) The doctrine of advancement has no application to the natives of India, Hindu or Mahomedan.(c) The rules of English Courts of Equity as to resulting trusts- Rules ap- ^Pply ^■Iso to personal estate, and therefore, where a ply to per- husband transfers stock into the names of himself and his- sonal wife, no resulting trust will arise for the husband, but the wife will be entitled to the whole of the fund by survivor- ship [d) ; so also in the case of a transfer of stock into th& names of a parent and child, the stock will belong to the child surviving, (e) The mere circumstance that the name of a wife or .child is^ inserted on the occasion of a purchase of stock is not sufi&cient to rebut the presumption of a resulting trust in favour of the purchaser. Surrounding '^ *^® surrounding circumstances lead to the conclusion that circum- a trust was intended. Although a purchase in the name of stances to a wife or a child, if altogether unexplained, will be deemed dered"^'" ^ 8^^*' ^^^ *^® surrounding circumstances may be taken inta consideration so as to say that it is a trust, and not a gift. Crutwell(f), the husband of the plaintiff, being in failing health, transferred his banking account from his own name into the joint names of himself and his wife, and directed the- bankers to honour cheques drawn either by himself or his wife,. and he afterwards paid in considerable sums to their account. All cheques were afterwards drawn by the plaintiff at the direction of her husband, and the proceeds were applied in payment of household and other expenses.

he was stated by the bank manager to have remarked at the time

Source page 166

91 he was stated by the bank manager to have remarked at the time of the transfer that the balance of the account would belong to the- survivor of himself and his wife. After the death of her husband (which took place a few months after the transfer), the plaintifE claimed to be entitled to the balance. It was held that the transfer of the account was not intended to be a provi,sion for the plaintiff,, but merely a convenient mode of managing her husband's affairs, and consequently that she was not entitled. E., said :; " In all the cases in which a gift to the wife has been held to have been intended, the husband has retained the dominion over the fund in this sense, that the wife during the lifetime of the husband has had no power independently of him, and the husband has retained the power of revoking the gift. In transferring a sum of stock, there is no obvious motive why a man should put a sum of stock into the name of himself and his wife. Looking at the fact that subsequent sums are paid in from time to time, and taking into view all the circumstances (as I understand I am bound to do) as a juryman, I think that the circumstances show that this was a mere arrangement for convenience, and that it was not intended to be a provision for the wife in the event which might happen, that at the husband's death there might be a fund standing to the credit of the banking account." Where a purchase, either of moveable or immoveable property, is made in the name of a wife or child, and the purchaser dies before the whole of the purchase-money is paid, the Purchase- purchase will enure for the benefit of the wife or child, paid, and the unpaid purchase-money is payable out of the purchaser's personal estate, (a) A purchase in the joint names of a father and son creates a joint tenancy. (6) In one case, where the father had no other estate to which a judgment- creditor could resort, ancvwhek the creditor was relieved in equity against the survi- created, vorship at law.(c) (a) Redington v.

from the son, this alone will not rebut the presump-

Source page 167

Purchase If a purchase is made by a parent in the nanae of a in the name child and of a stranger, whether of real or personal estate, of a child it will be considered as an advancement ; the stranger will and a be treated as a trustee for the child, and there will not be stranger. any resulting trust to the father, (a) In certain cases where a purchase is made in the name of Evidence child, the presumption of advancement may be rebutted. (6) to rebut acts and declarations The antecedent and contemporaneous presump- tion of ad- of the parent are admissible in evidence to rebut the pre- vancement. sumption ofadvancement, but his subsequent acts and declarations are inadmissible for that purpose, (c) In Demy v. Devoy(d), the presumption that the transfer by a father of stock into the joint names of himself, his wife, and child, was intended to be an advancement, was allowed to be rebutted by the evidence of the transferror that no trust was intended, but that the transfer was made under a misapprehension of its legal effect, (e) Subsequent Although subsequent acts and declarations of the acts and de- parent are not evidence to the support of the trust, clarations. subsequent acts and declarations of the child may be so.(/) The presumption of advancement will not be rebutted by the Possession fact of the father having continued in possession of the by father. estate during his life(g'), nor by the fact that he has expended money in repairs on the estate, (fe) Where a father purchases stock or shares in the name of a child, and receives the dividends during his life under a from the son, this alone will not rebut the presump- rewfve'd'b power father. ^ tion of advancement, (i) In Smith v. Warde(j), a father directed stock to be purchased in the names of himself and his wife in trust for his infant son. The purchase was made in the joint names without any trust being declared, and the father {a) Lamplugh v. Grahb, 1 M. & K., 511 ; Collin- (/ ) Sidmouth v. Eedington, 3 Ridg., Ill ; Taylor v.

received the dividends down to his decease. It was held, that

Source page 168

93 received the dividends down to his decease. It was held, that neither his son nor his wife (who survived him) were entitled to the stock, but that it formed part of his assets, (a) If, after a purchase of property by a parent or by a husband in the name of a child or wife, the purchaser Devise, devises or bequeaths it(fe), or leases it (c), the prima fade je^ase!^ '""^ presumption of advancement will not be rebutted. Where a testator by his will settled £1,000, reduced annuities, on each of his grand-daughters, the children of his only son, and two years afterwards he transferred a sum of £3,200, reduced annuities, which was all the property he possessed, into the name of his son, and died at the age of ninety-four, having resided the last ten years of his life with his son, who was a man of considerable property, it was held that the transfer to the son operated as an absolute gift to him free from any trusts, ((i) If a purchase is made in the name of a child who is already fully advanced by the parent, there will be a resulting trust for the father(e) ; but if the child be not at all, or advanc""!'' only in part, advanced, the presumption of advancement will not be turned into a trust. (/) Where lands are purchased in a certain place in the name of a child by a father, but it appears that the father is bound to settle lands so purchased in a particular manner, there will not be any advancement, but the child will be a trustee merely, (gr) (a) See also Hoyes v. Pitcher, 2 M. & K., 262 ; (/) Grey v.

LECTURE IV.

Source page 169

BENAMI TRANSACTIONS AND CONSTRUCTIVE TRUSTS. Benami transactions — Purchase in name of cliild — Tlie Indian Trusts Act, ss. 81, 82 — Burden of proof — Strangers •— Benami transactions among Mahomedans — Assent of benamidar unnecessary •— Disputing landlord's title — Suit by landlord against beneficial lessees — Strict proof required — Oral e¥idence — Proof of payment of purchase-money — Pleading benami transaction against purchaser under s. 66, Civil Procedure Code — Purchase at sale for arrears of revenue ■— Sale by benamidar — Standing by — Purchaser ■with notice ■ — Real owner may sue benamidar — Equitable owner — Suit by benamidar — Suit by creditors against benamidar ■— Transaction avowedly fraudulent — The Indian Trusts Act, s. 84 — Parties to suit — The Indian Trusts Act, s. 88 — Constructive trusts — Renewal of leases by trustee — Principle of rule — Instances •— Remedy — Agent of trustee — Legal adviser gaining advantage by ignorance — Gifts to person in fiduciary capacity — Voluntary gift where no fiduciary relation — When set aside — Onus of proof where fiduciary relation exists — Where it does not — Spiritual influence — Parent and child — Persons in loco parentis — Guardian and ward — Gift to legal adviser — Extent of rule — Gift in expectation of death — Strangers — Principles on which Court acts — Badges of fraud — Independent advice — At whose instance set aside — Acquiescence — ■ Confirmation and acquiescence — Laches.

" The Law of Benami," says Mr. Mayne(a), " is in no sense a

Source page 170

Mayne(a), " is in no sense a branch of Hindu law. It is merely a deduction from the well- tnown principle of equity, that where there is a purchase by A in the name of B, there is a resulting trust of the whole to A ; and where there is a voluntary conveyance by A to B, and no trust is declared, or only a trust as to part, that there is a similar trust in favour of the grantor as to the whole or as to the residue, unless it can be made out that an actual gift was intended. " In the English Courts an exception is made to this rule, where the person in whose name the conveyance is taken or made is a child of the real owner, when the transaction Purchase is presumed to have been made by way of advancement to child!" him. But this exception has not been admitted in India. There the rule is well established that in all cases of asserted benami the true criterion is to ascertain from whose funds the purchase-money proceeded. Whether the nominal owner be a child or a stranger, a purchase made with the money of another is 'prima facie assumed to be made for the benefit of that other"(6), whether a daughter or a son. " The wives and mothers of the members of a joint undivided Hindu family, so long as they continue to live in the family, and are supported out of its income, are just as much members of that family as their husbands and sons ; and as unity of possession is one of the essential characteristics of a joint undivided Hindu family, no difierence in the nature of the interests possessed by the different members thereof can affect the presumption with which we have to deal in this case. So far as the ordinary and usual course of things is concerned, the practice of making ienami purchases in the names of female members of joint undivided Hindu families is just as much rife in this country as that of making such purchases in the names of male members and .... the presumption against such acquisition is no less strong in the iormer case than in the latter, "(c) The Indian Trusts Act has given a statutory recogni- Trusts Ac? tion to benami transactions and it is enacted that— ss.

96 INDIAN TRUSTS ACT. [LeC. IV.

Source page 171

IV. that he intended to dispose of the beneficial interest therein, the transferee or legatee must hold such property for the benefit of the owner or his legal representative," and " Where property is transferred to one person for a consider- tion paid or provided by another person and it appears that such other person did not intend to pay or provide such consideration for the benefit of the transferee, the transferee must hold the property for the benefit of the person paying or providing the consideration." If the person in wh9se name the purchase is effected, is a stranger in blood or only a distant relative, he will be undoubtedly prima facie a trustee ; and if he desires to contend that the prima facie character of the transaction was not its real character, the burthen is on him. Gungapersaud Gosain{a) the purchase was made in the name of an only son, and it was argued that this circumstance changed the presumption, and that what would be the presumption in the case of a stranger does not exist between father and son ; that the presumption is advance- ment, and that, therefore, the burden of proof was shifted. But the Judicial Committee held, that there was no authority in Indian law, no distinct case or dictum establishing or recognizing such a principle or such a rule. " It is clear," said Knight Bruce, L. J.(6), " that in the case of a stranger the presumption is in favour of its being a benami transaction, that is a trust ; but it is clear also that in this country, where the person in whose name the purchase is made is one for whom the party making the purchase was under an obligation to provide, the case is different ; and it is said that that ought to be deemed the law of India also, not because it is the law of England, but because it is founded on reason and the fitness of things, if I may use the expression, or natural justice, that on such grounds it ought to be considered the law of India. Now, their Lordships are not satisfied that this view of the rule is accurate, and that it is not one merely proprii juris. Probable as it may be, that a man may wish to provide for his son to a certain extent, and though it may be his duty to do so, yet there are other considerations belonging to the subject ; among others, a man may object to making his child independent of him in his lifetime, placing him in such a position as to enable him to leave his father's house and to die, leaving infant heirs, thus putting the property out of the control of the father.

against the general rule, even in the absence of peculiar circum-

Source page 172

97 against the general rule, even in the absence of peculiar circum- stances ;but in India there is what would make it particularly objectionable, namely, the impropriety or immorality of making an unequal division of property among children Their Lordships are, therefore, satisfied that, according to the law by which this case must be governed, the presumption in favour of its being a benami transaction is different from that which would have existed by the law of England." In so far as the practice of holding and buying lands in the name of another exists, that practice exists in India as „ much among Mahomedans(a) as among Hindus ; and the transitions judgment in Gopeekrist Gosain v. Gungapersaud Gosain(b) among and the cases therein referred to are, at all events, authority Mahome- for the propositions that the criterion of these cases in *"^' India is to consider from what source the purchase-money comes ; that the presumption is, that a purchase made with the money of A, in the name of B, is for the benefit of A{c) ; and that, from the purchase by a father, whether Mahomedan or Hindu, in the name of his son, you are not at liberty to draw the presumption which the English law would draw, of an advancement in favour of that son.((Z) Although a purchase by a Mahomedan with his own money of an estate in the name of his son, raises a presumption of the son's name being used benami for his father, proof that the father's object was to affect the ordinary rule of succession as from him to that property is sufficient to give, as respects strangers, a title to the son independent of, and adverse to, the father, (e) The knowledge and assent of the person in whose name the purchase is made is immaterial ; in the greater number of . . , , instances of benami purchases they are made in the names benamidar of persons ignorant at the time of their being so made.(/) unnecessary, (a) Uzhar Ali v. Ultaf Fatima, 13 1889 (nephew) ; Chunder Nath v. A., 232 ; In re Kahandas, 5 Bom., Kristo, 15 W. Dokhobala, 10 Cal., 686 (daughter) ,- in Mahomedan law ' furzee ' or ' fioti- Jitam v. A., 53 ; Bhowan Doss (mistress), but see Kallu Mai v.

As a general rule, a tenant cannot dispute his landlord's title.

Source page 173

98 DISPUTING landlord's TITLE. [LCC. As a general rule, a tenant cannot dispute his landlord's title. The rule is founded upon the doctrine of estoppel, which ^'sput'^s is, as Lord Coke says, " a curious and excellent sort of tfue."*^ ^ learning." But it has been decided that the doctrine of estoppel does not apply to benami transactions, and that m this country a lessee may deny that the person in whose favour he has executed a lease was the real lessor, and beneficially entitled to the rent, and that he may prove by parol evidence that the person who granted the lease was only a henamidar for a third party. Kedarnath Chuckerbutty(a), Paul, J., said : " In England, where the usage denoted by henami transactions is wholly unknown, it is supposed, and therefore assumed, that all deeds and conveyances truly represent the titles of parties set forth in them. Deeds are called solemn instruments ; they are executed after con- siderable deliberation, and under the guidance, and with the advice, of able legal advisers. But in this country, it being well known that documents are neither: so drawn nor executed as in England, and it being equally well known that persons make statements wholly regardless of the truth for present and ulterior purposes, it would be unsafe and unjust to hold parties strictly to statements made by them in deeds and other documents, and to apply the technical doctrine of estoppel in the manner in which that doctrine is applied in cases governed by English law." The Indian Evidence Act reproduces the law in England and provides that no tenant of immoveable property shall during the continuation of the tenancy, be permitted to deny that the landlord of such tenant, had, at the beginning of the tenancy, a title to such immoveable property. (6) For the purposes of this provision, the real owner rather than the henamidar is the landlord and unless the henamidar shows any legal right to sue under the general law, he cannot maintain a suit for rent on the tenancy, (c) In such cases, payment to the real owner is a proper defence. (^) In the absence of particular-circum- stances where the rule of estoppel may come into play, it is open to the tenant to urge, that the plaintifi as henamidar for the bene- ficial owner is not entitled to claim, (e) (a) 7 B.

Lee. IV.J PROOF OF TITLE. 99

Source page 174

99 Suit by Where a lease was taken benami in the names of three ladies, who for some time paid rent to the lessor, and who were landlord sued for rent by him on several occasions when he obtained decrees, which he executed against their property, the beneficialagainst lessor was nevertheless allowed, when the ladies were unable lessees. to pay any rent, to sue their husbands, who were the beneficial lessees, (a) The Courts look with jealousy on benami transactions, and a person who claims under such a title must prove his case strictly, and he can only recover on the strength of the case required"" he asserts ; mere inferences will not be sufficient to induce the Court to take away property from the person in whose name it is held. (6) But although the habit of holding land benami is inveterate in India, that does not justify the Courts in making every presumption against apparent ownership, (c) Where bond fide creditors of the ostensible owner of property are claimants on that property, the Court will require strict proof on the part of any one seeking to have it declared that he held it only benami. (d) Though there may be in the evidence circum- stances which may excite suspicion, and doubt may be entertained with regard to the truth of the case made, it is essential to take care that the decision of the Court rests, not upon suspicion but upon legal grounds, established by legal testimony, (e) It Oral is not necessary that the nature of the transaction should evidence. be proved by writing, but oral evidence is admissible. (/) The question, whether a transaction, purporting on Evidence of benami its face to be a gift or a sale is benami, is always one of transaction. intention, (gr) In determining its real nature the consider- (a) Debnath Roy Ghowdhry v. Mehndi, 25 Cal., 473, (6) SreemancJiunder Dey v. Ramachandra, 28 ; Nowab Azimut Ali Khan v. R., 293 ; Tirumalayappa v. waree Mull, 13 Moo. A., 395 ; Faez Swami, 18 Mad,, 469. Srinivasa, 21 Mad., 56 ; Chunder Chuckerbutty, 11 Moo.

[Lec. IV.

Source page 175

IV. ations are several, (a) The source of the purchase-money is the first index of ownership.{6) Continued possession is a valuable evidence, but the merit of it may vary with its publicity, (c) The custody of title-deeds favours the title of the person in whose name the property stands (ti) and though unaccompanied by possession suffices to shift the burden on the party in possession. (eV Eeceipt of rents(/), registration in revenue recordsfgr), consider- ation(A), position of parties(i), subsequent conduct(y), and surrounding circumstances(i) may always be proved and consi- dered. Ifit is once established that a transaction is benami, the fact that the deeds and proceedings bear the benamidar's name, is perfectly consistent with the benami case, and is of no essential weight on the one side or the other in considering who is the prin- cipal.(?) The real owner of property, who is actually in possession, may plead in answer to a suit for redemption by a certified purchaser under s. 66 of the Civil Procedure Code(m), Pleading benami that the purchase was made benami by the plaintiff on transaction his behalf. (w) This section corresponds with s. 260 of against purchaser Act VIII of 1859 and provides that " No suit shall be under s. 66, maintained against any person claiming title under Civil Pro- a purchase certified by the Court in such manner as cedure Code may be prescribed, on the ground, that the purchase (o) Kali Sahu v. Eavji, 12 Bom., mad Hadi, 21 Cal., 227 P.

■was made on behalf of the plaintiff or on' behalf of some

Source page 176

IV.] PROOF OF TITLE. ■was made on behalf of the plaintiff or on' behalf of some ■one through whom the plaintiff claims. Nothing in this section shall bar a suit to obtain a declaration that the name of any purchaser certified as aforesaid was inserted in the certificate fraudulently or without the consent of the real purchaser, or interfere with the right of a third person to proceed against that property, though ostensibly sold to the certified purchaser, on the ground, that it is liable to satisfy a claim of such third person against the real owner." As a penal provision, this section should be construed strictly and literally, (a) This rule applies only to sales under the Code, and purchasers at Eevenue Sales or under the Public Demands Recovery Act can prove their real title. (6) It prohibits a suit against the certified purchaser by a beneficial owner(c), but does not declare benami purchases illegal(d), so that in such a suit the beneficial owner can have judgment for declara- tion orfor possession, in the event of confession or in the absence of defence, (e) When the claim is based on grounds other than benami purchase, an action is not based under this section. (/) The provisions of this section apply to ordinary benami purchases at execution-sales, but do not affect purchases of property by a member of a Hindu family. Those provisions, says the Privy Council, " were designed to check the practice of making what are known as benami purchases at execution-sales i.e., transactions in which A secretly purchases on his own account in the name of B. Their LordsMps think that they cannot be taken to affect the rights of members of a joint Hindu family, who by operation of law, and not by virtue of any private agreement or understanding, are entitled to treat as part of their common property an acquisition howsoever made by a member of a family in his sole name, if made by the use of the family funds."(g') (a) M. Lalla Bhagwan, 23 All., 34 ; Bishan v. A., 496 ; Baj uddin, 23 All, 175 ; Khunda v.

A purchase at a sale for arrears of revenue made by a managing

Source page 177

A purchase at a sale for arrears of revenue made by a managing „ . member of a loint Hindu family in his own name is not at sale for affected by the 21st section of Bengal Act I of 1845, which arrears of provides that " any suit brought to oust the certified pur- revenue, chaser as aforesaid on the ground that the purchase was made on behalf of another person not the certified purchaser, though by agreement the name of the certified purchaser was used, shall be dismissed with costs ; " and notwithstanding anything contained in that section, the members of the joint family may sue to enforce rights acquired by them under such a purchase as against the managing member, though he is the sole certified purchaser, (a) If property is purchased in the name of a benamidar, and all the indicia of ownership are placed in his hands, and the benamidar henamidar sells to a purchaser for valuable consideration, the true owner can only get rid of the effect of the aliena- tion by showing that it was made without his own acquiescence and that the purchaser took with notice of that fact. If the purchaser bought in good faith, and without notice, he acquires a good title as against the true owner and his heirs, or any subsequent purchaser from them.(&) Parties who stand by, and permit another to hold himself out to the world as the real proprietor of an estate when in n mg reality he is not so, and thus induce parties, innocent of the fraud, to lend their money upon such faith, are not entitled to any consideration from a Court of Equity and good conscience, (c) If a purchaser of an estate at its full value takes with notice of a trust, he is bound to the same extent and in the same witti m>tice. manner as the person of whom he purchased, for, knowing another's right to the property, he throws away his money voluntarily and of his own free will.(d) Notice is either actual(e) (o) Toondun Singh v. Gobind Chunder Singh, 13 'W.Bj.ySil ; a,&Tiaed, 11. R., d93 ; Nidhee 16 Cal., 137 ; Mir Mahomed v. See also (d) Mancharji Sorabji Chulla v. Muhammad, 26 AH., 490, Hakeem Meah v.

or constructive. What is sufficient to put a purchaser upon inquiry-

Source page 178

What is sufficient to put a purchaser upon inquiry- is good notice, — that is, where a man has sufficient information to lead him to a fact, he shall be deemed cognizant of it. It is suffi- cient tocharge a man with knowledge that he had that before him, which, if he had used due diligence, would have afforded the knowledge he desires, (a) And where there is a person in possession of the estate other than the nominal owner, the person in whose name the title-deed is, the purchaser is bound to enquire what is the nature of his possession. If he does not think fit to do so, he takes subject to the rights of the person in possession. (6) The real owner of property may sue the benamidar, either to declare his title to the property, or to recover possession of it, and may prove the ienami nature of the transaction, (c) ^^^' owner Thus where a portion of a taluq, which was confiscated by ^namidar. Government, really belonged to an innocent person who had allowed her property to remain in the name of the taluqdar, she was allowed to sue the Government and the taluqdar to recover the confiscated property, the Privy Council saying " the decree of confiscation against her trustee coiild on no principle of law, equity, or good conscience, be made to affect her, and certainly not to justify a sentence which, in effect, made her the sufferer for his o&ence."{d) The equitable owner of property which is in the name of a trustee may prove the henami nature of the transaction . in a suit by the trustee to obtain possession of the owner^ property, (e) Eegarding the right of the benamidar to sue, judicial opinion is not uniform. " In those cases which affirm the right of the benamidar so to sue, the right has been based partly benamidar on the fact that he is the transferee named in the regis- tered instrument constituting the transfer and on the principle that the contract can be enforced by the parties who have entered into it, and partly on the view that the benamidar must be presumed to be suing on behalf of the beneficial owner, or, to put the same idea into other words, that the suit is really brought by the beneficial owner through, and in the name of, the benamidar. On the other hand, those rulings which are adverse to the right of the benamidar to sue are mainly based on the ground that a (a) Mancharji Sorabji Chulla v. Shyam Lai, 38 AU., 122 (suit (6) Hakeem Meah v.

[Lec. IV.

Source page 179

IV. suit cannot be maintained by any person who fails to prove, if his title is challenged, that he has a real interest of his own in the subject-matter of the suit."(a) In all cases where the cause of action is based on tort or a contract entered into by a henamidar on his ostensible title, his right of suit is generally admitted. (&) Thus, the henamidar can maintain actions on personal bonds(c) and on mortgages, for redemption(d!), foreclosure(c), or sale.(/ ) But where the henamidar seeks for possession or for other reliefs connected with possession, the Calcutta(5)) and the Madras(i^) High Courts deny the right of action, while the Bombay(i) and Allahabad( j ) High Courts hold a contrary view. The right of appeal follows the right of suit.(A;) The henamidar can execute his decree and his application if in accordance with law saves limitation. (^) But no person can be made liable for the decretal amount, on the ground that he is a henamidar for the judgment-debtor, unless the decree binds him as party or the judgment-debtor's representative, (m) (o) Per Stratohey, C. C, 892 ; Atrabanessa v. (6) Hara Gobind v. Purnachandra, Safatulla, 43 Cal., 504 (partition-suit 11 C. J., 47 ; for a case of damages not allowed) ; Sheolal v. Ramasami, 28 Mad., 244 ; State, 30 Mad. , 245 ; Srinivasa v. on appeal, 30 Mad., 88 ; Pasupaii v.

All decrees passed in suits, by or against a benamidar, are

Source page 180

Section 11 — , 368 ; TiUak 30 AH

IV.] TRANSACTION AVOWEDLY FRAUDULENT. 105 All decrees passed in suits, by or against a benamidar, are binding on the real owner{a), for the benamMar is always presumed to have the full authority of his undisclosed principal. (6) The operation of this rule is however limited to cases where the real owner has allowed the dispute to be fought out between his benami- dar and a third party and has abstained from coming forward, but when such knowledge or implied authority is disproved, the real owner is left unaffected by such iudgments.(c) Creditors may enforce their claims against the property of their debtor held for him 6ewami.((Z) Thus it has been held, e -(.v that a conveyance to female members of a Hindu family, creditors the father continuing in absolute and uncontrolled posses- against sion during his life, and his son entering into possession ''enamidar, after his death, could not exclude the claim of the son's creditors, (e) In many cases the object of the benami transaction is avowedly to defraud creditors, and against them it is, as we have seen(/), void.(5r) But as between the true owner and the Jyo^e^Jf'"" benamidar the question arises, whether the owner can sue fraudulent, for the restitution of the property, alleging that the sale was fraudulent, or can set up the defence of his own fraud in an action by the benamidar. Formerly it was considered that no title could be founded upon fraud, and that if a man chose to oonvey his property to another admittedly for the purpose of deceiving the public, defrauding his creditors, and avoiding the ■ends of justice, he disentitled himself to any relief(A), even though no person had been defrauded, (i) And the Courts refused to recognize any distinction in favour of an ignorant female. (^' ) (a) Shangara v. 11. , 368 ; TiUak 30 AH., 30 ; Gopi Nath v. Ghunder, (h) Soushun Khatoon Chowdrain v. Brojo- The Collector of Mymensingh, S.

" Courts of Justice," said Jackson, J., " are designed for the

Source page 181

106 TRANSACTION AVOWEDLY FEAUDULBNT. [LeC. TV, " Courts of Justice," said Jackson, J., " are designed for the protection of honest suitors, and the enforcement of just claims. They are not available as machinery to aid in the carrying out of schemes of fraud. It is right that parties should know, in making secret arrangements in regard to their property for fraudulent purposes, such as defeating their creditors, that they are entering on a dangerous course, and that they must not expect the assistance of the Courts to extricate themselves from the difficulties in which their own improbity has placed them."(a) So the Courts refused to allow a defendant to plead, that a deed which was admittedly executed by him, was executed for the purpose of defrauding his creditors, on the ground that, though a deed may be avoided on the ground of fraud, the objection must come from a person neither party nor privy to it, and that no man can allege his own fraud to invalidate his own deed. (6) And the principle was applied equally to persons claiming through the author of the fraud, (c) In the later cases, however, these principles have not been followed, and the original owner of property has been aMowed t& plead that the transaction was fraudulent, the reason being, that the real rights of the parties are to be ascertained, and if the plea were disallowed, the Courts would assist the benamidar to obtain property by means of fraud. Thus, in a suit brought by the plaintiff for registration of her name in the place of a person from whom she said she had purchased the property, one of the defendants contended that the plaintiff's vendors had purchased the property benami for her (the defendant), and that she had been in possession of it from the date of her purchase. It was held that she was not estopped by this statement from now showing the real truth of the transaction. " In many of these cases," said Couch, C.

should be entered into for the purpose of defeating creditors, yet

Source page 182

107 should be entered into for the purpose of defeating creditors, yet the real nature of the transaction is what is to be discovered, the real rights of the parties. If the Courts were to hold that persons were concluded under such circumstances, they would be assisting in a fraud, for they would be giving an estate to a person when it was never intended that he should have it." (a) The rule was thus laid down in terms rather too broad. A distinction was soon made between cases in which the fraud had been accomplished and those where it stopped at the stage of intention. " It is clear, therefore," said(6) Mookerjee, J., " that although in the earlier cases a very stringent rule was laid down to the effect that a person is not entitled to ask a Court of Justice to afford him relief from the consequences of his own misconduct, the later cases enunciate a more lenient rule that the real nature of the transaction ought to guide the Court in determining the real rights of the parties. Upon this rule has been engrafted the distinction that, although where the intended fraud had been carried into effect, the Court will not allow the' true owner to resume the indivi- duality which he has once cast off, in order to defraud others(c) yet if he has not defrauded any one, the Court will not punish his inten- tion by giving his estate away to another, where retention of it is an act of gross fraud. "(tZ) This view has been accepted by the Privy Council(e) and the law is thus finally settled. The Indian Trusts Act likewise enacts that " Where the owner of property transfers it to another for an illegal purpose and such purpose is not carried into execution, or the transferor J.^^ Indian mittingis not asthe guilty transferee as the totransferee, retain the or propertythe effect might of per-be s.'^sl.^ "^ ' to defeat the provisions of any law, the transferee must hold the property for the benefit of the transferor."(/) {a)S.M. The fraud may be SoondureeDebia, 21 W.

108 INDIAN TRUSTS ACT. [LCC. IV.

Source page 183

The real ground of this distinction is based on the maxim, In pari delicto potior conditio defendentis et possidentis, so that where fraud or illegality has been effected by a colorable grant, the Court helps neither party and says " Let the estate lie where it falls."(a) As a logical result of this maxim, it follows that in an action for possession on the conveyance, the defendant is not precluded from setting up the benami nature of the transaction, notwithstanding that the fraud had been carried out and the defendant is thereby sheltered by the plea of his own fraud. (6) ^' The rule of law, which allows a defendant to protect himself against an action by the plaintiff on a contract made or deed entered into between them by showing the illegal or immoral nature of the transaction, is based on grounds of public policy and the benefit that accrues thereby to the defendant is the inevitable result of the application of such rule and is not based on any right to which he is entitled."(c) But as between the benamidar and the real owner, the judgment in a suit is conclusive, if in su'ch suit the bond fides of the trans- action had been avowed and upheld.(d) " It is a clear and well- established principle of law," says Abdur-Kabim, J., "that, when the decree of a Court has been passed upholding a certain transaction between the parties to a suit, neither the plaintiff nor the defendant will be allowed afterwards to say that the decree was the result of a collusive arrangement arrived at by them in order to carry "out a scheme of fraud and that it should therefore be treated as a ntdlity, and the state of things which existed previously to the passing of such decree be restored. And so also, when two persons have combined to defraud a third person and succeeded in their effort without obtaining the decree of a Court, the Court will not permit one of the parties to such fraud to show that the transaction between him and the other party to the fraud was not really what it purported to be and that it does not therefore bind him. In the first case the decree is regarded as a subsisting and effectual decree, so that the question covered by it is treated as Res Judicata ; and in the second case, the Court refuses on grounds of public policy to help a man, who, by his act, has imposed upon another, to get rid of the consequences of that act as against himself."(e) A benamidar may generally sue in his own name and where there is no objection, he can have a decree in his favour. To^suU Such a suit therefore is so far properly instituted, although it may be partially defective. {/ ) If the defect is charged, (a) Petherpermal v. Krishna, 18 (e) Kqndeti Kama Bow v. But see contra Sidlingappa ma, 31 Mad., 485.

Lee. IV.] CONSTRUCTIVE TRUSTS.

Source page 184

IV.] CONSTRUCTIVE TRUSTS. im the real owner must be allowed to be made a party, (a) Likewise in a suit by the real owner the henamidar may be added. In either case the addition makes no difEerence, for the old suit is only continued and the question of limitation does not arise. (6) A suit will lie in which the plaintiff does not sue to render void an act done by him in fraud, or in other terms, to be relieved from the effect of his own fraudulent act, but simply sues to have an act legal in itself enforced, though done with the motive of keep- ing property out of the reach of his creditors, (c) The last kind of trust with which we have to deal is that known as a constructive trust. A constructive trust is one which the Court elicits by a construction put upon certain acts of tive teusts. parties. Such a trust is raised wherever a person clothed with a fiduciary character{d), as for instance, a factor(e), agent(/), partner(^), or mortgagee(A), gains some personal advantage, by availing himself of his situation as trustee ; for, as it is impossible that a trustee should be allowed to make a profit by his office, it follows that so soon as the advantage in question is shown to have been acquired through the medium of a trust, the trustee will be decreed to hold for the benefit of his cestui que trust.{i) But until a judgment is obtained, the money cannot be said to belong to the principal.(j ) (a) mta Nath v. Mahadev, 22 Bom., 672; (h) Erusappa v. Congnve, ib., 150, n; possession is a constructive trustee for Brookman v.

110 CONSTRUCTIVE TRUSTS. [LeC. IV.

Source page 185

The term ' constructive trustee ' is often used as synonymous with a trustee de son tort.{a) In Soar v. R., said : "The cases seem to me to decide that, where a person has assumed, either with or without consent, to act as a trustee of money or other property, i.e., to act in a fiduciary relation with regard to it, and has in consequence been in possession of or has exercised command or control over, such money or property, a Court of Equity will impose upon him all the liabilities of an express trustee of an express trust. The principal liability of such a trustee is that he must discharge himself by accounting to his cestui que trust for all such money or property without regard to lapse of time. There is another recognised state of circumstance in which a person not nominated a trustee may be bound to liability as if he were nominated a trustee, namely, where he has knowingly assisted a nominated trustee in a fraudulent and dishonest dis- position ofthe trust-property. Such a person will be treated by a Court of Equity as if he were an express trustee of an express trust." In AbJcan v. 10 of the Limitation Act, providing that a person in whom property has become vested in trust for specific purpose can- not plead limitation in a suit by a cestui que trust, is applicable to trustees & sow tori also." Persons who wrongfully usurp the power of trustees, such as members of a committee, become virtually trustees de son tort and are liable for breaches of trust. (i) But a person claiming a title hostile to the trust is only a trespasser. (e) The Indian Trusts Act enacts that " Where a trustee, executor, partner, agent, director of a company, legal adviser, or Act'Tss"^*^ other person bound in a fiduciary character to protect ' ' * tlie interests of another person, by availing himself of his character, gains for himself any pecuniary advantage, or where any person so bound enters into any dealings under circum- stances inwhich his own interests are, or may be, adverse to those of such other person, and thereby gains for himself a pecuniary (o) Mara v.

■advantage, he must hold lor the benefit of such other person the

Source page 186

Ill ■advantage, he must hold lor the benefit of such other person the advantage so gained." A common instance of a constructive trust is, where trustee of leasehold property renews the lease in his own name. The leading case on this point is Keech v. 8andford.(a) Renewal of There the lessor refused to renew the lease for an infant, Jrustee^ and the trustee then got a lease made to himself. Lord ' King, however, declared that the trustee must hold the renewed lease for the infant, though no fraud was alleged, saying : " This may seem hard, that the trustee is the only person of all mankind who might not have the lease ; but it is very proper that rule should be strictly pursued, and not in the least relaxed." An executor rfe sow tort cannot renew a lease in his own name. (6) Where the renewed lease comprises lands not included in the former lease, the trust will not attach to such lands, (c) The principle upon which trustees and executors are not allowed to take renewals of leases of trust-property to themselves is, that it is for the public good that persons in fiduciary o/'"';'^'-^ positions shall not be allowed to reap any benefit from the positions which they h.old..{d} If a person who has a limited interest in a lease renews it in Instances. his own name, he can only hold it as a trustee for the other persons interested(e) ; and if a settler creates a trust of a leasehold interest, he cannot renew the lease for his own benefit. (/) If a trustee, upon his representations, acquires an absolute interest in the trust-property by virtue of an Act of the Legislature, he will be a trustee of the interest he has acquired. (5) Where several persons are jointly interested in a lease, one of them cannot obtain a renewal to himself (A), as for instance, in the case of one of several partners obtaining a renewal of the lease of the partnership premises, (i) A mortgagee who renews a lease must hold it for the (o) Sel. N., 372. and see Griffith v, Owen (1907), 1 Ch., (6) Mulvany v. Griffin, 1 Soh. & Lef., (g) Cooper v.

benefit of the mortgagor, (a) A trustee cannot, by fraudulently

Source page 187

IV. benefit of the mortgagor, (a) A trustee cannot, by fraudulently incurring a forfeiture of the lease of the trust-property, obtain a renewal to himself. (6) So a tenant who fraudulently fails to pay Government revenue, in consequence of which the estate is sold,^ and becomes the purchaser, will be declared a trustee of the land for the lessor, (c) Where a trustee who has a right to obtain a renewal sells the right, the trust will attach upon the purchase- money in his hands. ((?) The trustee will have to assign the renewed lease free from Remedy ^^^ incumbrances, except an under-lease made bond fde at the best rent(e), and he must account for mesne rents and profits(/), even though the lease has expired.(^) The trustee will be entitled to be indemnified against covenants entered into upon the renewal, to his costs(fe), and to money laid out upon lasting improvements, (i) If the trustee has parted with his interest in the renewed lease to a volunteer(j'), or to a purchaser with notice(fc), the cestui que trust will, nevertheless, be entitled to the same reme- dies as against the trustee. (?) A mere agent of a trustee will not be made to account to the cestui que trust as a constructive trustee(m), unless he be- trus?ee° comes a party to the breach of trust, when he will be liable to the extent of his participation, (w) A legal adviser is bound to give sufficient advice to his client(o),. Legal ad- ^^^ ^^ ^^7 advantage or property comes to him by his ignor- viser gaining, ance or the neglect of his duty, he will be a constructive advantage by trustee for the benefit of the person who would have bene- ignorance. g^^^^ -^ ^j^^ adviser had done his duty. " Whether," said Lord Eldon(p), " you meant fraud or not, you who have beea (a) Eakestraw v. Howard, 25 Beav., (1897), 2 Ch., 24. Walley, 1 Vem., 484 ;. {c) Balkrishna Vasudev v. Dolphin, 2 B. &, B., 290 ; Parker havrav Narayan, 5 Bom., 73 ; Amolak v. Dhondi, 30 Bom., 466. hough, 2 Bro.

wanting in what I conceive to be the duty of an attorney, if it

Source page 188

113 wanting in what I conceive to be the duty of an attorney, if it happens that you get an advantage by that neglect, you shall not hold that advantage, but you shall be a trustee of the property for the benefit of that person who woxild have remained entitled to it, if you had known what you ought as an attorney to have known ; and not knowing it, because you ought to have known it, you shall not take advantage of your own ignorance. It is too dangerous to mankind, that those who are bound to advise, and who being bound to advise ought to be able to give sound and sufficient advice, it is too dangerous to allow that they shall ever take advantage of their own ignorance — of their own professional ignorance — to the prejudice of others."(a) When a barrister prepared a will for a friend, of which he was appointed executor, and in that capacity became entitled to the personal estate of the testator, he was decreed to hold it as a trustee for the next-of-kin. " The testator's intention," said Lord Chancellor Hart, " was not directed to his personal estate, and he thought he was only disposing of his real estate, it became the bounden duty of the defendant to have informed him, that if he made no disposition of his personal estate, the law, in consequence of his being the executor, would entitle him to retain it for his own benefit. He was bound to inquire of the testator, in plain and distinct terms, whether it was his will that the defendant should so retain the personal estate for his own benefit The defendant has stated that he did not know the rule of law which gives to an executor the undisposed-of residue. Be it so ; but in the administration of justice, what ought to result from that ignorance ? The testator relied on the defendant's knowledge of law as well as on his integrity. As to duty of solicitor, see Powell v.

[Lec. IV

Source page 189

IV advantage from the person whom he advises, he will be treated as a trustee, (a) A voluntary gift to a person, who does not stand in any fiduciary or confidential position towards the donor, will not Voluntary be set aside if there was no fraud, surprise, or undue influence, gift where no fi duciary and the donor acted of his own free wOl, however improvi- relation dent the gift may be. Nottingham said, that if a man will impro"wdently bind himself up by a voluntary deed, and not reserve liberty to himself by a power of revocation, the Court will not loose the fetters he hath put upon himself, but he must lie down under his own folly ; for if the Court gave rehef in such a case, it would estabhsh the proposition that a man can make no voluntary dis- position ofhis estate, but by his will only, which would be absrurd. Prima facie such a gift is good, but it will be set aside if the donor can prove fraud, surprise, or undue influence, (c) The Indian Trusts Act enacts that "Where, by the exercise of undue influence, any advantage is gained in derogation of Act'T 8q"^ ^ *^® interests of another, the person gaining such advantage without consideration, or with notice that such influence has been exercised, must hold the advantage for the benefit of the person whose interests have been so prejudiced." Where the fiduciary relation exists, the onus of proving that the Onus of transaction is righteous is on the donee.(d) The Indian Evidence Act provides (s. Ill) that where there is a question proofwhere as to the good faith of a transaction between parties, fiduciary one of whom stands to the other in a position of active relation exists. confidence, the burden of proving the good faith of the transaction is on the party who is in a position of active confidence. And the following illustrations are given :— (i) " The good faith of a sale by a client to an attorney is in question in a suit brought by the chent. The burden of proving the good faith of the transaction is on the attorney ; (ii) the good faith of a sale by a son just come of age to his father is in question in a suit brought by the son.

Where th% fiduciary relation does not exist, a person who

Source page 190

115 Where th% fiduciary relation does not exist, a person who takes a benefit under a voluntary gift which is not subject to a power of revocation, has thrown upon him the burden does^noj* of proving that the gift was meant by the donor to be irrevocable. A gift not meant to be irrevocable, but not subject to a power of revocation, may be set aside at the instance of the donor, (a) Even where the matter appears to rest upon a good consi- deration, as where there is a sale, the Court will inquire into the circumstances, with a view to ascertain whether undue influence was exercised or hot.(&) If the donee is a person who exercises influence by means of his spiritual ascendency over the donor, the gift infl"e^e will be set aside, (c) The Court looks with suspicion upon gifts made by a child to a parent shortly after attaining majority, and such gifts will be set aside if there is any appearance of undue influence (-hiw" ^ having been exercised by the parent. Where a father who had advanced a son during his minority took a bond from the son on his attaining majority for a much greater amount than the sums advanced, the son being without means, the transaction was set aside ; Lord Northington saying :— " If the obligor gives a volxmtary bond, and never complains of any imposition or hardship in obtaining it, the Court will only postpone it to creditors, and not set it aside for other volunteers. Nay, if it be given with advice and deliberation, this Court will not set it aside for the obligor. But if a man gives a voluntary bond for more than he is able to pay, the transaction speaks weakness on the one side and a sort of imposition on the other."(d!) The Court will not interfere where the transaction is fair and reasonable, and no undue influence has been exercised, (e) The principles upon which the Court acts in transactions of this nature were thus stated by Lord Langdale in Archer v. Hudson.{f) " Nobody has ever asserted that there cannot be a pecuniary transaction between parent and child, the child being of age ; but. everybody will affirm in this Court, that if there be a pecuniary transaction between parent and child, just after the child attains the age of twenty-one years, and prior to what may be called a complete ' emancipation,' without any benefit (a) Wollaston' v.

proving to the child, the presumption is, that an ujfdue influence

Source page 191

IV* proving to the child, the presumption is, that an ujfdue influence has been exercised to procure that liabiUty on the part of the child, and that it is the business and the duty of the party who endeavoura to maintain such a transaction, to show that that presumption is adequately rebutted ; and that it may be adequately rebutted is perfectly clear. This Court does not interfere to prevent an act even of bounty between parent and child, but it will take care (under the circumstances in which the parent and child are placed before the emancipation of the child) that such child is placed in such a position as will enable him to form an entirely free and unfettered judgment, independent altogether of any sort of control." The principles upon which the Court acts in dealing with. transactions between parent and child, will be apphed in Persons dealings between a minor who has recently attained his ^parentis. j)arentis.{a)majority, and a person who has stood towards him in loeo So, gifts from a ward to a guardian made shortly after the ward's attaining majority will be set aside if there is any and wMd suspicion of undue influence on the part of the guardian. " Where," said Lord Hardwicke(6), " a man acts as guardian, or trustee in the nature of a guardian, for an infant, the Court is extremely watchful to prevent that person's taking any advantage immediately upon his ward or cestui que trust coming of age, and at the time of settling accounts or delivering up the trust, because an undue advantage may be taken. It would give an opportunity either by flattery or force, by good usage unfairly meant, or by bad usage imposed, to take such an advantage ; and therefore the principle of the Court is of the same nature with relief in this Court on the head of pubhc utility .... All depends upon public utihty ; and therefore the Court will not suffer it, though, perhaps, in a particular instance there may not be actual unfairness . . . The rule of the Court as to guardians is extremely strict, and in some cases does infer some hardship ; as where there has been ar great deal of trouble, and he has acted fairly and honestly, that yet he shall have no allowance ; but the Court has established that on great utility, and on necessity, and on this principle of humanity ; it is a debt of humanity that one man owes to another, as every man is liable to be in the same circumstances."(c) If, however, (a) Archer v. Hudson, 7 Beav., 551 ; Mahapatur v.

Lee. IV.] GIFT TO LEGAL ADVISER. 117

Source page 192

117 the relation of guardian and ward lias been completely determined, and the presumption of undue influence has been successfully Tebutted, a gift from the ward will be allowed to hold good, (a) A legal adviser, whether counsel, attorney, or vakeel, can take no benefit from his client while he is acting for him in a professional capacity, beyond his regular professional j^' j°dyiser. charges. (6) In order to support a gift from a legal adviser to his client, it must appear that the relation has been dissolved, (c) If it is endeavoured to make the gift good, by expressing that valuable consideration has been given by the legal adviser, evidence will be admissible to prove that the consideration is fictitious, (ci) If there is no suit pending, and no undue influence has been exercised by the legal adviser, a gift to him may be supported(e), and he may take a benefit under a will if it can be proved that "the testator acted freely. {/) In the class of cases we have just considered, undue influence is presumed to have been exerted until the contrary is proved, and the person benefited is bound to show that all the terms and condi- tions ofthe contract are fair, adequate, and reasonable. (51) The rule extends to all the relations in which dominion may be exercised by one person over another, even though no actual fiduciary relationship in the strictest sense of the words ^^g*" ° exists. Thus gifts by patients to medical attendants(fe), by a younger sister to an elder(i), by a woman to her intended husband(j), and gifts obtained by operating on the fears of Another(i), have been set aside. (a) Hatch v. Hatch, 9 Ves., 296 ; (1903), 1 Ch., 27. Atkins, 3 M. & K.., 113 ; (d) Tomson v. Hand, 2 Ves., 259 ; (6) Shamaldhone v. Tremenheere, 15 Ves., 34 ; ■Cal., 493 ; Moheshpur Cnal Co. v.

rangers. .^ tainted and infected with the undue

Source page 193

118 GIFT IN EXPECTATION OF DEATH. [LeC. A voluntary deed, which contains no power of revocation, executed in the expectation of immediate death, will be set of aside, even though there has been no undue influence, if the pectation death. Settlor did not intend that it should be operative in case he recovered, (a) The Court has power to relieve against strangers. " Who- g ever," said Wilmott, C. J.(b), " receives the gift, must take rangers. .^ tainted and infected with the undue influence and imposi- tion ofthe person procuring the gift ; his partitioning and canton- ing itout among his relations and friends will not purify the gift and protect it against the equity of the person imposed upon. Let the hand receiving it be ever so chaste, yet, if it comes through a polluted channel, the obligation of restitution will follow it."(c) But the Court will not interfere as against a bond fide purchaser without notice. (<Z) The principles upon which Courts of Equity act in setting aside voluntary gifts to persons standing in a fiduciary Principles relation to the donor were thus stated by Lord Brougham in Hunter v. Atkins(e) : " There are certain relations known Court acts. to the law as attorney, guardian, trustee ; if a person stand- ing in these relations to client, ward, or cestui que trust, takes a gift or makes a bargain, the proof lies upon him that he has dealt with the other party, the client, ward, &c., exactly as a stranger would have done, taking no advantage of his influence or knowledge, putting the other party on his guard, bringing everything to his knowledge which he himself knew.

that deception was practised, or that the attorney or solicitor

Source page 194

119 that deception was practised, or that the attorney or solicitor availed himself of his situation to withhold any knowledge, or exercise any influence hurtful to others and advantageous to him- self. In a word, standing in the relation in which he stands to the other party, the proof lies upon him (whereas in the case of a stranger, it would lie on those who opposed him) to show that he has cut off, as it were, the connection which bound him to the party giving or contracting, and that nothing has happened which might not have happened had no such connection subsisted The rule, I think, cannot be laid down much more precisely than I have stated it, that where the known and defined relation of attorney and client, guardian and ward, trustee and cestui que trust, exists, the conduct of the party benefited must be such as to sever the connection, and to place him in the same circumstances in which a mere stranger would have stood, giving him no advant- age, save only whatever kindness or favour may have arisen out of the connection ; and that where the only relation between the parties is that of friendly habits, or habitual reliance on advice and assistance, accompanied with partial employment in doing some sort of -business, care must be taken that no undue advantage shall be made of the influence thus acquired. The limits of natural and often imavoidable kindness with its effects, and of imdue influence exercised or unfair advantage taken, cannot be more rigorously defined. Nor is it, perhaps, advisable that any strict rule shoidd be laid down — any precise line drawn. If it were stated that certain acts should be the only tests of undue influence, or that certain things should be required in order to rebut the presump- tion ofit, such as the calling in a third person, how easy would it be for cunning men to avoid the one or protect themselves by means of the other, and so place their misdeeds beyond the denun- ciations ofthe law, and secure the fruits of them out of its reach ! If any one should say that a rule is thus recognized, which from it§ vagueness cannot be obeyed, because it cannot well be discerned, the answer is at hand.

At whose q£ jjjg representatives or devisees. (/) If the donor or

Source page 195

IV. been concealment from those who ought naturally to have been made acquainted with the transaction, (a) But it is not necessary that there should have been such acts as these in order to enable the Court to interfere. The Court will inquire whether the grantor not only executed the deed voluntarily, but also whether he had a full laiowledge of the consequences of his act. (6) The mere fact that the deed was read over to him is not sufficient, it must be proved that he understood its nature, (c) And the case will be stronger against the donee when the deed was not prepared imder the donor's instructions and was not read over to him.(d) Where persons stand in a fiduciary relation to each other, the party benefited must be able to show that the donor had com- dent^'advice petent and independent advice, and the capacity of the donor is of importance, (e) When undue influence is proved, the deed may be set aside at the instance of the donor or grantor, or after his death. At whose q£ jjjg representatives or devisees. (/) If the donor or set aside. settlor himself requires the aid of the Court to transfer a fund in Court, which is the subject of the settlement, to the donee, the Court cannot refuse its assistance, whether the settlement may, or may not, be impeachable upon the ground of undue influence. (</) If the subject-matter of the gift can be traced into the posses- sion of third persons, it will be afEected by the fraud or undue influence which attached to the original transaction. (A) The cestui que trust, if competent to contract, must ce^ce?^' ^®^^ ^^® remedies within a reasonable time, otherwise he may be barred by acquiescence, (i) (a) Jevirs v. Barker, 4 Russ., 507; 312 ; iiZe,? v. Habiba, 8 All., 267 ; Parjivandas, 30 Bom., 578. Sheobarat, 7 Cal., 245 (/) Anderson v.

Lee. IV.] LACHES. 121

Source page 196

121 Although the evidence may show the existence of undue influence at the time of the settlement or gift, it will not be set aside, if the settlor has, during a course of years and Confirma-tion and in several transactions, acted upon it and treated it as in cence. all respects valid, (a) But acquiescence must be shown to acquies- be after the discovery of the right to impeach a transaction(6), in which case it will preclude the parties acquiescing from raising objections afterwards.(c) And where a client dealing with his solicitor executes a voidable instrument, and afterwards chooses to confirm it by will, the confirmation will be efEectual.((Z) In order that acquiescence or confirmation may be valid, there must be no continuing influence, as otherwise there would be no free agency on which to found acquiescence, (e) And where a confi- dential and fiduciary relation is shown to exist, its continuance will be presumed, unless there is direct evidence of its termi- nation. (/) Laches and considerable delay in applying to the Court Laches, to set aside an instrument impeachable by reason of undue Costs. influence will, in general, be a bar to relief. (5^) For a bar by delay or acquiescence, there must be some conduct amounting to confirmation of the transaction(/i), and it must be shown that he knew that he had the right or being a free agent at the time, deliberately determined not to inquire what his rights were or to act upon them.(i) Even after the lapse of the period of limitation, a defendant is entitled by way of equitable defence to plead fraud or undue influence in answer to an action to enforce the transaction. (_7) Trustees are bound to protect the interests of their cestuis que trustent, and are justified, when they are called upon to transfer a fund pursuant to an arrangement between persons standing in a fiduciary relation to one another, in taking every precaution to ascertain that no fraud or undue influence has been exercised by the person to whom the fund is to be transferred. Garter, 5 Ves., 862 ; (/) Bhodea v. Vanderplank, 2 K. & J., 1 ; 252. afid., 2 Jur., N. S., 599 ; Dimsdale v. {g) Barwell v. Barwell, 34 Beav., Dimsdale, 3 De., 556 ; Jarratt v. Boop Lai, 30 623: Mad., 169. (e) Hatch v.

122 COSTS. [Lee. IV.

Source page 197

IV. they act capriciously, or, having ascertaiaed that the transaction is not one which the Court would set aside, they persist in refusing to transfer, and so render a suit necessary, they will be liable to pay costs, (a) (o) See Firmin v. S., 609; ife & S., 99 ; Ee Cater, 25 Beav., 361 ; Metcalfe, 2 D.

LECTURE V.

Source page 198

LECTURE V. * PARTIES ttp THE TRUST. Acceptance ot trust — Indian ^'riisty. 10 — Trustees also executors — Acting as agent — Executoi- of an executor — Renunciation of probate — Partial acceptance — Recitals' in deed as to state of trust — Trustee in fact — Liability of trustee — By whom trust may be created — Greueral rule — ■ The Sovereign — Corporations — Prizes of war — ■ Infants — Married women — Stridhan — Alien — Persons convicted of certain offences — Grantee under sanad — Who may be » cestui que trust ■— The Government — Corporations — Aliens — Who may be a truBtee — Persons ■ under disability — Aliens — The Sovereign — Not the Government of India — Corporation — Presidency banks — Married women — Insolvent — Cesluis que trusient — Relatives — Number of trustees — Disclaimer — How made — Gift to trustee or executor. A TRUST is accepted by any words or acts of the trustee indicating with reasonable certainty such acceptance. Acceptance A trustee may accept the trust by signing the trust-deed of trust, when there is one(a), or, in the case of a will, by express Indian Trusts declaration of his assent. (&) Prima facie he is assumed to "<='-• i°' assent to a devise(c), and his acceptance may be implied from his neglect to disclaim for a long time, such as twenty years((i), even though he has not acted in the trust, (e) And acceptance may be implied from acts of a trustee in relation to the trust-estate. (/) It is difficult to lay down any general rule as to what acts of a trustee will amount to acceptance. An executor, who takes out probate of the will of his testator, thereby accepts the office and becomes responsible for any loss incurred by the acts of his co- executor(^) ; he cannot escape responsibility on the ground that he has taken no active part in the administration of the estate. (A) So if he interferes with the assets of the testator, he will be liable even though he does not take out probate.(i) Where an executor (a) Buckeridge v.

cutors. ag of the

Source page 199

124 ACCEPTANCE OF THE OFFICE. [LCC. V. signed a letter requesting payment by debtors to the estate, or where a co-executor who had not proved, after the death of the executor who had proved, gave a power-of-attomey to sell a small part of the testator's assets, which was not acted upon, and had not further intermeddled, it was held that he had accepted the office, (a) So the joining in an assignment of a lease, for the pur- pose ofpassing the legal estate, has been considered to be of itself sufficient evidence that the executor had accepted and acted in the trusts of the will(6) : and an executor will be Uable if he exercises acts of authority or ownership over the testator's estate, (c) Trustees I^ executors are also appointed trustees, taking out also exe- probate amoimts to an acceptance of the trusteeship as well cutors. ag of the executorship, (c?) If a trustee under a will does not expressly accept, but receives the rents and profits of the trust-property, he cannot escape agentf ^^ from liability to account, on the ground that he acted merely as agent or factor, (e) In Lowry v. Fulton(f) a trustee who acted as agent, and who had not proved, was held not to have accepted the trust ; but that was a peculiar case, and cannot be considered as an authority against the general rule.(flr) According to English law, an executor who takes probate ofan^exe- °^ *^® ^^ ^ ^" executor, becomes executor of the will of cutor. the first testator, and cannot renounce probate of the first will, and take probate of the second.(A) But this is not the law as regards persons governed by the Succession Act or the Probate and Administration Act, 1881. (i) Renuncia- Instead of accepting a trust, the intended trustee may, tion of within a reasonable period, disclaim it and such disclaimer probate. gjjaH prevent the trust-property from vesting in him.(j ) (o) Cummins V. JBTom*, 16 M. & 2 Sch. & Lef., 231 ; Malzy v. S., 80. (/) 9 Sim,, 11.5. (6) Vrch V. Walker, 3 My. & Or., (g) See further as to acts of acoept- 702. ance, Lewin on Trusts, Ch.

The renunciation of probate by a person named as executor

Source page 200

125 The renunciation of probate by a person named as executor and trustee, is not in itself a disclaimer of the trust, but it is one circumstance of evidence, and if there be no proof of his ever having acted, the Court, after a long lapse of time, as sixty years, will presume a disclaimer, (a) Where real and personal estate was devised and bequeathed to B, upon trust, for sale and conversion, and upon further trusts for the heir-at-law of the testator abso- lutely, and B renounced probate, and died three years afterwards without having disclaimed the trusts, it was held, that he must be taken to have intended to disclaim them when he renounced probate. (6) Where a person named as a trustee refused to act, but only took the trust-deed into his possession for safe custody, until some one could be found to undertake the trust, it was held, that there was not enough to charge him.(c) If the instrument of trust contains distinct and separate trusts, and a trustee is appointed to execute all the trusts, he cannot accept some and disclaim the others, but must g™'^' accept all or disclaim all.(d) Although the general rule is, that if a trustee acts in the trust, or intermeddles with the trust-property, he will be held to have accepted the trust, yet he may show that acts which apparently show an acceptance are referrible to some other ground, (e) But he cannot so act with reference to a trust-fund as to leave himself at liberty to say afterwards, either that he did, or did not, act as trustee. (/) Parol evidence is admissible upon the question of acceptance or non-acceptance of the trust, (gr) If the instrument creating the trust contains recitals speci- fjdng the trust-property, the trustees should, as a matter of r ■(■ i ■ precaution, ascertain that the recitals are correct, for other- deed as to wise they may be held liable for the property mentioned, state of But they wiU not be estopped from averring against, or *r"=t- offering evidence to controvert, a recital in the deeds contrary to the fact, which has been introduced into the deed by mistake of fact, and not through their own fraud or deception. (^) In Fenwich (a) M'Kenna v. G. h. , 702; Be Lord and Fullerton (1896), 79 : and see Earl Oranville v. 7 Hare, lfi6.' (In this case the third (e) Stacey v. Elph, 1 M. & K., 195"; executor is said to have 'declined,' Dovev. Everard,lit,. &M.,231;Lovir]/ but there seems to be no difEerence in v. Fulton, 9 Sim. ,118. fact between ' declining ' and 're- ( / ) Gonyngham v.

of a deceased trustee will incur personal liability by paying

Source page 201

126 ACCEPTANCE OF THE OFFICE. [LeC. Greenwell(a) Lord Langdale said : " A doubt has been raiised as to whether Miss Cuthbertson possessed the £5,000 stock at the time of the marriage. Now I cannot say, that the trustees are bound by the recital of that fact contained in the deed ; we have had so many instances of parties representing that they were entitled to particular property, and which representation has afterwards turned out to be wholly untrue, that it would be unjust and dangerous to bind third parties by such representations, and I am not aware that it has ever been held, that trustees are bound by the representations of parties about to be married of the state of their property. I do not, therefore, accede to the argument that the recital alone binds the trustees."(6) A person may become a trustee in fact though not of right, and if he becomes possessed of a trust-fund with notice of ScT*^^ '" *^^ *™®*' ^® '^ ^® bound by it.(c) The representatives of a deceased trustee will incur personal liability by paying away the residue of their testator's estate, unless under an order of Court, if afterwards a debt is discovered to which it is Uable, though they had no notice, (dl) And if property has been distributed among the legatees of a person who has committed a breach of trust, though in ignorance of this fact, those who are damnified by the breach of trust may recover from the legatees, (e) When executors have made an assignment on the appointment of a new trustee, they lose their character of executors and become trustees only.(/) And an executor, to whom a legacy is given upon trust, ceases to hold it as executor, from the time he has appropriated it to the purposes of the trust, (g^) The liability of trustees for loss to the trust estate is the of^rustee same, whether the acceptance of the trust has been express, or is imphed by a Court of equity from their acts.(^) (a) 10 Beav., 418. of time ; Ridgway v. Newstead, 3 DeG. (6) And see Oore v. Bowser, 3 Sm. & F. & J., 474 ; Blake v.

Lee. v.] WHO MAY CREATE A TRUST.

Source page 202

We have now to consider by whom a trust may be trusTmay created be created. The Indian Trusts Act enacts that " a trust may be created — (a) by every person competent to contract, and, (6) with the permission of a principal Civil Court of original jurisdiction, by or on behalf of a minor ; but subject in each case to the law for the time being in force as to the circumstances and extent in and to which the author of the trust may dispose of the trust-property." The Indian Contract Act(a) provides that — " Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject : "(6) And a person is said to be of sound mind for the purpose of making a contract if, at the time when he makes it,— " He is capable of understanding it, and of forming a rational judgment as to its eifect upon his interests. A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind. A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind."{c) The Act contains the following illustrations :— " A patient in a lunatic asylum, who is at intervals of sound mind, may contract during those intervals. " A sane man who is delirious from fever, or who is so drunk that he cannot understand the terms of a contract, or form a rational judgment as to its effect on his interests, cannot contract whilst such delirium or drunken- ness '. The Sovereign, as to his private property, may, by Letters Patent, grant it to one person upon trust for another(ci) ; Government of India, as it has the power of TheSover- and the disposing of public property, may convey such property to trustees if it think -fit. Corporate bodies may create trusts.

^nzes of distribute in a prescribed mode among the captors ;

Source page 203

V. as no similar Statute exists in this country, I apprehend that the law as it stood before the Statute(a) would be enforced here. Prizes of war vest in the Sovereign, and are commonly, by the Royal Warrant, granted to trustees, upon trust to ^nzes of distribute in a prescribed mode among the captors ; but an instrument of this kind is held not to vest an interest in the cestuis que trustent, which they can enforce in equity, but it may be at any time revoked or varied at the pleasure of the Sovereign before the general distribution. (6) An infant, as we have seen, cannot contract, and therefore J cannot create a trust by any declaration during minority, nor can he create a trust by will.(c) Married women subject to the Indian Succession Act (X of 1865) may create trusts. Section 4 of the Act provides that Married women. no person shall by marriage acquire any interest in the pro- perty ofthe person whom he or she marries, nor become incapable of doing any act in respect of his or her own property which he or she could have done if unmarried. This section, so far as regards property, abolishes, by implication, the doctrine of unity of persons between husband and wife.((?) So far as the property is concerned, therefore, the wife has as much control over it as if she were unmarried. This section does not apply to Hindus, Mahomedans, Buddhists, Sikhs or Jains, (e) By the Married Women's Property Act (III of 1874), s. 4;- " The wages and earnings of any married woman acquired or gained by her, after the passing of the Act, in any employment, occupation, or trade carried ou by her, and not by her husband, and also any money or other property so acquired by her through the exercise of any literary, artistic, or scientific skill, and all savings from, and investments of, such wages, earnings, and property, shall be deemed to be her separate property, and her receipts alone shall be good discharges for such wages, earnings, and property." And she may, therefore, create a trust in respect of such property.

With regard to Hindus, a married woman may create a trust

Source page 204

129 With regard to Hindus, a married woman may create a trust of her stridhan, or any other property which is absolutely at her own disposal, as she can devise such property, (a) But " ^"' she cannot devise property inherited from males, since her interest in it ceases at her death, and therefore she cannot create a trust of such property to continue after her death, though she may create a trust of her hfe-interest. According to EngUsh law, an ahen might always have acquired real estate, whether freeholds or chattels, by purchases, though he could not take it by operation of law, as by " descent or jure mariti ; and if he purchased it, he might have held it until office found, but could not give an alienee a better title than he had himself. An alien, therefore, could only create a trust of real estate until the Crown stepped in. As to personal estate, an alien friend might, although an ahen enemy could not, be the lawful owner of chattels personal, and might exercise the ordinary rights of proprietorship over them, and consequently create a trust. Now by the Naturalisation Act (1870), real and personal property of every description can be acquired, he'd and disposed of by an alien in the same manner in all respects as by a natural-born British subject. (6) The English law relating to ahens has not been intro- duced into India, and aliens here may acquire property freely, and deal with it as if they were British subjects, (c) In some cases the property of persons convicted of certain ofEences is Uable to forfeiture. In every such case the p offender is incapable of acquiring any property, except convicted for the benefit of Government, until he has undergone the of certain punishment awarded, or the punishment to which it shall offences, have been commuted, or until he shall have been pardoned.

been affected. (a) In the case of a prisoner sentenced to death,

Source page 205

V. been affected. (a) In the case of a prisoner sentenced to death, such an order is useless, for a forfeiture of ancestral property maintains only during the life of the convict. (6) Before passing such sentence, the courts must make a careful inquiry as to the amount and nature of the property affected and as to the persons whose right as heirs would be thereby superseded in favour of the Government. The interests of widows and children need a special provision, (c) In certain cases the forfeiture of property necessarily follows conviction. Any person who wages war against the Queen, or attempts to wage such war(ci), or abets the waging of such war(e), or collects men, arms, or ammunition, or otherwise prepare; to wage war with the intention of either waging, or being prepared to wage, war against the Queen, forfeits all his property in addition to any other punishment to which he may be sentenced.(/ ) There is another class of offences where the forfeiture of specific property may form part of the punishment awarded. When offenders commit, or prepare to commit, depredation on the territories of any power at peace with the Queen, or receive property with the knowledge that it has been taken in waging war, or com- mitting depredations on a power at peace with the Queen (g) ; or if a public officer buys property which he is forbidden to buy, the specific property may be forfeited. (A) No trust can, therefore, be created of property which may be forfeited if the Government chooses to exercise its rights ; and, of course, no trust can be created where forfeiture necessarily follows the conviction. Although a sanad granted by the Government of India, sub- sequent tothe proclamation of March, 1858, of an estate in Grantee Oudh, confers an absolute legal title on the grantee, such sanad. grantee may, nevertheless, by an express declaration of trust, or by an agreement to hold in trust, constitute himself a trustee of the estate for a third party, (i) (a) B. Amritlal, 29 All., 25 ; Oaya B., 444.

A trast may be created in favour of any person, or body of

Source page 206

Section 9 — (e) See Lewu, 12th Edn

131 A trast may be created in favour of any person, or body of Who may persons, so long as the purpose is lawful, (a) The Government may be a cestui que trust.{b) be a cestui que trust. In England a trust of lands cannot be limited to a j^ie Gov- corporation without a heense from the Crown.(c) But as ernment. the Mortmain Acts do not apply to India((i), apparently a Corpora- may be a cestui que trust. '°"^" corporation in this country An aUen also may be a cestui que trust.{e) • Aliens. Every person capable of holding property may be a trustee ; but, where the trxist involves the exercise of discretion, he cannot execute it unless he is competent to contract. Any person may be a trustee, even an infant, or a person of unsound mind, if the trust is purely passive, and does not require the exercise of prudence and discretion. For ^^°t™^f instance, a discretionary trust for sale cannot be exercised Persons by an infant, for an infant is not a person competent to under dis- contract.(/) In King v. 9. (e) See Lewu, 12th Edn., 46. (6) See as to trusts in favour of the (/) Act IX of 1872, s.

" It is to be observed that all the cases relied on with reference

Source page 207

V. " It is to be observed that all the cases relied on with reference to powers, have gone upon the principle that the infant is merely the instrument by whose hands the testator or donor acts. The donor, it is said, may use any hand, however weak, to carry out his intentions. This principle fails altogether to reach the case of a devise in trust to an infant. It is not in the power of the author of a trust to confer upon an infant a capacity in himself which the law does not give him, although he may make the infant his hand, his agent, to execute his purpose. He cannot give an estate to an infant, and say that he may sell it when the law says that he cannot do so." It is not advisable, however, to appoint an infant as trustee. The only acts which he can perform are such as are purely minis- terial, and he cannot be made to account for money received by him as trustee during his minority, (a) Infants, however, have no privilege to cheat men(6) ; and a Court of Equity has jurisdiction to make an infant answerable, on his attaining majority, for a fraud committed by him during his minority, though it is not easy to determine in what cases the Court will thus exert itself, (c) From the great inconveniences attending the appointment of an infant as trustee, there arises a strong presumption, wherever property is given to an infant, that he is intended to take it not as trustee but beneficially. ((^) An alien may be a trustee of either moveable or immoveable property.

Lee. v.] WHO may be a trustee. 133

Source page 208

133 "the Governor-General in Council and alien friends may sue in the Courts of British India, as if they were subjects of Her Majesty. No alien enemy residing in British India, without such permission •or residing in a foreign country, may sue in any of such Courts, (a) In England, the Sovereign may sustain the character of a trustee, so far as regards the capacity to take the estate and to execute the trusts ; but great doubts have been ^^^^^ °^^' entertained whether the subject can, by an,y legal process there, enforce the performance of the trust. (6) And it has recently been expressly decided that the Govern- ment of this country cannot be a trustee. The Secretary of State for India{c), booty of war had been ^°' *^ granted by Her Majesty by Royal Warrant to the Secretary ^f india. of State for India in Council, ' in trust,' to distribute amongst the persons found entitled to share it by the decree of the Judge of the Court of Admiralty, to whom the matter had been referred by the Sovereign for that purpose, with a direction that doubts should be finally determined by the Secretary of State, Tinless Her Majesty should otherwise order. An action was brought against the Secretary of State by a person claiming to be entitled to share in the fund, and praying for an account. It was held, that the warrant did not operate as a transfer of property or create a trust, and that the defendant, being merely the agent of the Sovereign "to distribute the fund, was not liable to account to any of the parties entitled. J., said : " The Government of India is not, as it appears to me, capable of being a trustee ; nor is the Secretary of State for India in Council (the name by which the Government can be sued) a person capable of being a trustee any more than the Attorney-General in this country would be, or any other person, who sued in certain cases for, or on behalf of, the Grown." (d) According to the technical rules upon which the doctrine of uses proceeded, a corporation could not have been seised to a use, for, it was said, it had no soul, and therefore no tioS°'^*' confidence could be reposed in it.(e) But on principles of ordinary and natural justice, a body corporate has been held to be compellable to execute a trust, thus abolishing the rule that there must be a person in whom the confidence is placed.(/) " Primd (a) Ibid , s.

facie," said Lord Romilly, M. R.(a), " an ordinary Municipal

Source page 209

R.(a), " an ordinary Municipal Corporation has full power to dispose of all its property like any private individual, and the burden of proof lies on the person alleging the contrary to establish a trust. The trust may be of two characters ; it may be of a general character, or of a private and individual character. A person might leave a sum of money to a corporation, in trust, to support the children of B, and pay them the principal at twenty-one. That would be a private and particular trust, which the children could enforce against the corpora- tion, ifthe corporation, applied the property for its own benefit. On the other hand, a person might leave money to a corporation, in trust, for the benefit of the inhabitants of a particular place, or for paving or lighting the town. That would be a public trust for the benefit of all the inhabitants, and the proper form of suit, in the event of •any breach of trust, would be by an information by the Attorney-General(6), at the instance of all or some of the persons interested in the matter.

a married woman as trustee, (a) But this does not apply to

Source page 210

135 a married woman as trustee, (a) But this does not apply to persons subject to the Indian Succession Act (X of 1865)(6), nor is it known to Hindu or Mahomedan law. The property of an insolvent, and such property as he may acquire before he obtains his discharge, vests in the Official Assignee(c), but not estates vested in him as trustee. These are unaffected by the insolvency(d), and although the trust-property may be changed, it will not vest if it can be traced, as where it exists in the shape of bills or notes(e), or any other substituted form(/), for the assignees of a defaulting trustee have no better right than the trustee, (p) But where the trust-property had become mixed with the bankrupt's general property, and could not be distinguished, it was held that the assignees would take it, and that the cestui que trust must prov .(h) Oestuis que trustent are not, as such, incapacitated from being trustees for themselves and others, but, as a general rule, they are not altogether fit persons for the office, in conse- trulunt ^^" quence of the probability of a conffict between their interest and their duty.(i) Where the trusts are onerous, and other persons cannot be found to undertake them, the Court will appoint a cestui que trust to be a trustee.(y) It is not advisable to appoint relatives to be trustees. The worst breaches of trust are committed by relatives, who Rgjatjyes are unable to resist the importunities of their cestuis que trustent when they are nearly related to them.(&) Where therefore the husband of a cestui que trust was appointed a trustee, .'-. provision was invariably made for a co-trustee. (^) (a) Smith r. Smith, 21 Beav., 385; (1900), 2 Ch. (C. But (h) Ex parte Dumas, 1 Atk., 234; see ReJesson, 7th Aug., 1878, M.

estate. (/)

Source page 211

An adequate number of trustees should be appointed. There are strong reasons against allowing trust-property to trustees remain in the hands of one trustee. He has the absolute control over it, and if tempted to commit a breach of trust, he can do so with less fear of detection than if there are co-trustees. When one of several trustees dies, steps should be at once taken to provide a successor. The safe rule, where money is concerned, is to appoint at least three trustees and to keep the number full.{a) No one is bound to accept a trust, and therefore any person who has been appointed a trustee may, if he has Disclaimsr. not acted in the office, disclaim. (6) If, however, he has Act'Tio"^*^ exercised any acts of ownership, he cannot disclaim, (c) ' " ' " Though," said Lord Eedesdale(^), " a person may have agreed in the lifetime of a testator to accept the executorship, he is still at liberty to recede except so far as his feelings may forbid it ; and it will be proper for him to do so, if he finds that his charge as executor is different from what he has conceived it to be when he entered into the engagement." The office of trustee cannot be. disclaimed in part, so that a disclaimer as to a portion only of the trust-property is ineffectual, (e) A disclaimer of the office of trustee, express or implied, amounts to a disclaimer of the legal estate. (/) According to English law before the Conveyancing Act, 1881(5'), the heir of a trustee could not disclaim, the reason being that the legal estate, if the disclaimer were allowed, would have vested in the Crown. (A) As it was decided that the English rules of succes- sion to immoveable property applied to the descent of estates in land held by European British subjects(«), probably it would have been held that the heirs of a European British subject could not disclaim. As regards other British subjects, the distinction between legal and equitable estates does not exist, and the rules of inheritance are different, and therefore it would seem that the heir of such last named subject may disclaim.

Lee. v.] GIFT TO TRUSTEE.

Source page 212

Lee. v.] GIFT TO TRUSTEE. in every case one of fact to be decided from the circumstances of the case, (a) The disclaimer may be by parol, but it is more prudent that it should be by writing, as there is less fear of ambiguity. (6) ^^^ ^^^^^ The instrument should be a disclaimer, and not a conveyance, though, if the intention to disclaim is apparent on the conveyance, that will be sufficient, (c) A trustee may disclaim in Court{rf) or by his written statement, (e) If notwithstanding he is continued as a party to the hearing, he will be entitled to his costs as between party and party. (/) But where the statement is needlessly long, the Court will allow only reasonable costs of a simple disclaimer. (^r) And there may be conduct which amounts to a clear disclaimer. (A) A trustee or executor to whom a bequest is given, may take the gift and disclaim the office(i), unless acting in the office is a condition attached to the gift.(y) The English Gift to Law presumes that a legacy to a person appointed executor is executor'^ given to him in that character, and this presumption can be rebutted by " something in the nature of the legacy or other circumstances arising on the will."(i) The Indian Succession Act lays down, however, that " if a legacy is bequeathed to a person who is named an executor of the will, he shall not take the legacy unless he proves the will or otherwise manifests an intention to act as executor."(Z) The language is peremptory, and leaves no room for a presumption. It is not left to the Court to decide whether the legacy was given to the person named in his character as executor. It is assumed that it was so given, and the prohibition follows, (m) A trustee or executor who has disclaimed may afterwards act as agent for the other trustees or executors, (n) He should, (a) See Doe v. Meymott, 14 Beav., 471 (j) Warren v. Massie, 3 Ves., 148 ; Aid., 31 ; Stacey v. R., 15 Ir., 55. (where a person named as trustee is to (i) Talbot V.

however, be careful to disclaim clearly, as otherwise he may be

Source page 213

V. however, be careful to disclaim clearly, as otherwise he may be considered to have accepted by acquiescence, (a) A disclaimer by one of two or more co-trustees vests the trust- property in the other or others(&), and makes him or then! sole trustee or trustees from the date of the creation of the trust, (c) When an authority to deal with the trust-property is given to several trustees and one of them disclaims or dies, the authority may be exercised by the continuing trustees, imless from the terms of the instrument of trust it is apparent that the authority is to be exercised by a number in excess of the number of the remaining trustees. (<Z) Where the trust is accompanied with a power, the truotee mav administer the trust without the appointment of a now tru£.tee.(e) A person named as trustee without his sanction, and called on to disclaim, is authorized in taking the opinion of counsel as to his obligation to execute a disclaimer. (/) (o) Be Stevens (1897), 1 Ch., 422 & Sm., 230. (1898), 1 Ch. (C. A.), 162; Small v. id) Indian Trusts Act, =. 44, Marwood, 9 B. & C, 299 ; Tovmson (e) Adams v. Crawford, 13 Sm., 96 ; Eeed, I Hare., 435. D., 643 ; (6) Indian Trusts Act, s. Wayman, 5 DeG. ( f) Re Tryon, 7 Beav., 496.

LECTURE VI.

Source page 214

DUTIES AND LIABILITIES OF TRUSTEES. Duties and liabilities of trustee : Indiiin Trusts Act, s. 11 — Trustee to acqua'nt himself of state of property : Indian Trusts Act, s. 12 — Trustee bound to protect trust-property : Indian Trusts Act, s. 13 — Gtetting in trust-estate — Estate outstanding on personal security — When securities to be realized — Care required from trustee : Indian Trusts Act, s. 15 — Loss occasioned by agent — By act of co-trustee — Trust-fund consisting of money — Control of trust-fund — Failure of banker — Trustee to prevent waste : Indian Trusts Act, s.

140 TRUST- PROPEKTY. [LBC. VI.

Source page 215

Section 12 — ^°* ^^''^ back and inquire whether the former trustees had performed their duties up to that time

If he sign a power-of-attomey for sale of stock, or execute a deed of reconveyance on repayment of a mortgage sum, he is as answer- able for the money as if he were himself the solicitor, and had the sole management of the transaction. "(a) But where by the negligent conduct of a solicitor, acting as trustee, an action is brought against himself and his co-trustee, he is liable to indemnify the co-trustee against the costs though the estates suffered no damage by it. (6) " Every person who accepts a trust is boimd to execute it(c) with fidehty, and with reasonable diligence ; it is no excuse to say that he had no benefit from it, but that it was merely honorary : the Court of Chancery looks upon all trusts as honorary, and as a burthen upon the honour and conscience of the party intrusted ; and for the execution of which he is even precluded from receiving or making any benefit or advantage whatsoever, "(ei) " The trustee is bound to fulfil the purpose of the trust, and to obey the directions of the author of the trust given at the time of its creation, except as modified by the consent of all the Act'Tii"^^ beneficiaries being competent to contiact. Where the beneficiary is incompetent to contract, his consent may, for the purposes of this section, be given by a principal Civil Court of original jurisdiction. Nothing in this section shall be deemed to require a trustee to obey any direction when to do so would be impracticable, illegal or manifestly injurious to the beneficiaries." A trustee is bound to acquaint himself with the nature and particular circumstances of the trust-property. But a Trustee to ^^^ trustee is not liable for any breach of trust committed himself of ^7 ^^^ predecessor. He is entitled to assume that every- state of thing before his coming in had been duly performed, and property. jjg cannot be charged with wilful default, because he did Act s. 12. ^°* ^^''^ back and inquire whether the former trustees had performed their duties up to that time.(e) If, however, he does not enquire into the state of the trust- fund, and does not take steps to get in any part which may be outstanding on improper secxirity, he will be liable for the conse- quences ofhis neglect, like any executor who knows that a debt is due to his testator's estate and omits to get it in.(/) Where (a) Lewin, 12th Edn., 230. (N.

marriage-settlement contained a covenant on the part of the husband

Source page 216

VI.] marriage-settlement contained a covenant on the part of the husband to settle after-acqnired property, it was held that a new trustee was not liable for not having inquired as to whether any such settlement had been made, there being nothing to lead to a suspicion that any default had been made by the old trustees or the covenantor.(a) A trustee of chattels, personal, settled for the separate use of a married woman should take care that an inventory is made, otherwise he may be deprived of his costs. (6) The office of a trustee is to a certain extent onerous. We have seen(c) that the law does not recognize a passive trustee, but that he must take an active part in the execution of the trust. A trustee is bound to maintain and defend all such suits, and (subject to the provisions of the instrument of trust) to take such other steps as, regard being had to the nature and amount or value of the trust-property, may be reasonably protect title reqxiisite for the preservation of the trust-property and the to trust- assertion or protection of the title thereto, (rf) And as a Pi^op^rty. general rule, trustees are bound to press on all the remedies ^ct'^" 13"^'^ for the recovery of debts due to the trust-estate ; and if any securities seem proper to be continued, it seems the only safe course for trustees to adopt, is to submit the point to the judgment of the Court, — not to decide upon it themselves, unless a discretionary power to that extent be expressly or by clear imphcation given to them : else they will be answerable for any loss that may ensue in consequence of their misplaced confidence, however good may have been their intention, (e) Power has been given to trustees in India to sue for the posses- sion ofspecific moveable property to the beneficial interest in which the person for whom they are trustees is entitled. Possession is to be recovered in the manner prescribed by the Code of Civil Procedure. (/) Trustees are bound to place the trust-property in safe secu- rities, and will be liable for loss if they delay in getting it in and investing it.(^) For instance, if debts are outstand- pitting ing, it is the duty of the trustees to get them in as soon as estate. " possible ; and if in consequence of their neghgence the debts are lost by the debtor's insolvency, or if the right to sue is barred by limitation, they will be personally liable. (%) (a) Geavea v. G., (Where rent fell in arrear, the trustees 29i_ were made liable to make the arrears (b) Enqlani v. Downs, 6 Beav., 279. good, though without interest.) (c) Ante., p.

outstandmg security, it is the duty of the executors to take

Source page 217

So, if a man covenants to settle a certain sum within a given period, and the trustees execute the trust-deed and sign a receipt for the money, they will be liable. (a) There is no objection to trustees receiving money before the date on which it is payable, if the debtor chooses to pay it. (6) There is no rule laid down for the time within which executors are bound to get in the assets(c), but the Court will be guided by the circumistances and executors generally have a wide discretion. (<i!) Trustees may fairly allow a debt to be paid by instalments, but they will not be justified in granting any great indulgence. (e) In the exercise of a fair discretion they need not commence legal proceedings unnecessarily, but they should exert themselves to get in the debt, and, if necessary, commence compulsory proceedings to obtain it.(/) Where by the terms of the trust payment is deferred to a specified time, prompt action is necessary (^), but in the absence of funds, the trustee is not bound to commence proceedings at his own expense. (A) When trustees bond fide exert themselves to discharge their duty, and merely commit an error in judgment, unless there is a plain violation of trust, they will not be visited severely. The fair exercise of their judgment is a protection to them, although the consequences may be bad.(t) Estate If part of a testator's estate is outstanding on personal outstandmg security, it is the duty of the executors to take steps to get security. it iii(i), even though the debtor is a co-executor. (A) The fact that the testator approved of the security and had continued it for many years, and that it was good at the time of his death, will not relieve the executors from responsibility in case of loss.(i) Personal security changes from day to day by reason of the personal responsibility of the party giving the security, and . B,., 5 Ch., 1i ; Grove (j) Garrett v. Price, 26 Beav., 103 ; Se Brogden, Marsden v. D., 546; Be Stevens (1898), Re CAapmam (1896), 2 Ch. (C. Holland, 19 232 ; iJe B/aifce, 29 Ch.

as a testator's means of judging of the value of that responsibility

Source page 218

VI.] REALIZATION OF SECURITIES. ' 143 as a testator's means of judging of the value of that responsibility are put an end to by his death, the executor who has omitted to get it in within a reasonable time, becomes himself the security, (a) An application to the debtor must be followed up by legal proceed- ings ifnot attended to ; a mere demand through an attorney will not discharge the executor. (&) But executors wUl not be liable for not taking legal proceedings, if it appears that the proceedings would have been useless, (c) And if it appears that though the whole debt could not have been recovered, a part might, they will only be liable for what might have been recovered.(<i) But the burden of proving futility of any proceedings lies on the trustee pleading the excuse, (e) A direction in the will that the executors shall call in securities not approved by them, will not discharge them from liability for loss arising from the failure of personal security. Such a direction must be considered as referable to securities upon which a testator's property might, from their nature, be invested, and not as author- ising akind of investment which a Court of Equity will not sanction. (/) And if a settlement contain a clause that the trustees are to get in the money, " whenever they shall think fit and expedient so to do," they will be liable if they refrain from enforcing payment out of tenderness to the tenant- for-Ufe, without due regard to the interests of all the cestuis que trustent.{g) If the testator's property is outstanding on securities which may reasonably be considered as safe, the executors are not y., bound to call them in, until the creditors call for payment securities of their debts ; or unless they have reason to suspect the to be real- solvency of the debtor. " What," said Lord Thurlow(A), '^^'^* " is the executor to do. Is he to call in the securities before creditors require payment of their debts ? Must the money lie dead without interest, or must he put it out on fresh securities ? On the original securities he had the testator's confidence for his sanction ; but on any new securities it will be at his own peril."{i) The trustees, (a) Bailey v. Gould, 4 Y. & C, 546 ; iJe Hurst, 63 L.

Indian Trusts |^g liable when the trust-property was

Source page 219

144 CAEE EEQUIEED FROM TRUSTEE. [LCC. VI. however, should enquire whether the securities are safe, and call them in if they are not. (a) In all suits concerning property vested in a trustee, executor, or administrator, when the connection is between the persons beneficially interested in such property and a third person, the trustee, executor, or administrator shall represent the persons so interested, and it shall not ordinarily be necessary to make them parties to the suit. But the Court may, if it thinks fit, order them, or any of them, to be made parties. (6) A trustee is bound to deal with the trust-property as carefully as a man of ordinary prudence would deal with such property if it were his own ; and, in the absence of a contract to the contrary, a trustee so dealing is not responsible for the loss, destruction or deterioration of the trust-property. A trustee is bound to take the same care of the trust-property as he would of his own. Care re- ^^^ ^^^ more care(c) ; and if he has taken such care, quired from he will not be liable for loss, destruction, or deterioration trustee. of the trust-property. Thus, a trustee was held not to Indian Trusts |^g liable when the trust-property was stolen from his ' ' ' house, together with property of his OYm.(d) So, where the defendant, an administratrix, had handed over certain goods to her solicitor, from whose custody they were stolen, it was Loss occa- Jigiij that she should not be charged, (e) Where, however, agent ^ *^® ^°®® ^® occasioned by the act of a person employed by the trustee, the trustee will have to bear the loss(/) ; as where the loss is caused by his solicitor, having committed a fraud on the occasion of the investment of the fund on mortgage.(5') Where the trust-property consists of securities or articles which pass by delivery, and there are several trustees, the property oj^trustee should be deposited with the barkers of the trustees ; and if it is so deposited, and the bankers, without the privity or concurrence of the co-trustees, allow one of the trustees to have access to the property, and he makes away with it, the co-trustees remaining ignorant of the fact are not liable to make good any (o) Ames v.

portion of the property misappropriated, (a) An executor is not

Source page 220

145 portion of the property misappropriated, (a) An executor is not bound to insure, or continue the insurance of, his testator's property against fire. (6) Where the trust-fund consists of money, the trustee, pending investment, may place the money in the hands of a (c) The trustee should open a separate account Trust-fund banker, in the name of the trust-estate, and should not mix the of mone^ trust-fund with his own money, (d) If he does so, he wiU be liable in case the banker fails, (e) If the mixture assumes a form in which it is impossible to ascertain the shares of the trust, the trust will be entitled to the whole mixture. (/) And a trustee win be Uable for loss, if he allows a person to draw upon the trust-property in the bank, and such person misappropriates the money, (gf) And he will be liable for the failure of a banker(A), or broker (i), if the money ought to have been invested or otherwise dealt with, and not left in the banker's or broker's hands : and the usual indemnity-clause will not in such cases protect the trustee. (j) The trustee must be careful not to put the trust-fund out of his control and under the control of other persons. If he does so, he guarantees the solvency of those persons, and f^u^t-fund will be answerable for any loss that may ensue(^) ; and the liabUity will be the same, although the persons imder whose control the property was left were co-trustees, (i) In a case before Sir A. Hart, in Ireland, an executor was held to be justified, though he had placed the assets in a bank so as to be imder the control of the co-executor. The money was entered in the books to the joint account of the co-executors, but the bank was in the habit of answering the cheques of either co-executor singly. " It is the custom of bankers," said Lord Chancellor Hart, (o) Mendes v. Guedalla, 2 Johns. & Ex parte Kingston, L. R., 6 Ch., 632 ; H., 259. and see In re Hallett's Estates, Knatch- (6) Bailey v.

[Lec. VI.

Source page 221

VI. " that what is deposited by one to the joint account may be with- drawn bythe cheque of the other ; and for convenience of business, it is necessary tins risk should be incurred, for it would be very hard to transact business if every cheque should be signed by all the executors." However, his Lordship admitted, that "if there were any fraud or collusion, wilful default or gross neglect, or if the executor had any reason to put a stop to the mismanagement by the co-executor, the case would be altered."(a) " But," says Mr. Lewin, " even with this qualification the doctrine is so contrary to the principle of other cases, that no trustee or executor could be advised to rely upon it in practice." Trustees will be liable for loss incurred by the failure of bankers, if it was their duty to have invested the trust- Failure of lianker. moneys(&), or to have paid them over to new trustees(c), or into Court, (d) An investment with the bankers themselves upon the security of their notes-of-hand is not sufficient, for that is merely a personal security, (e) But executors require a certain amount of ready-money to enable them to wind up their testator's estate, and are entitled to keep such a sum uninvested at their bankers, and will not be made liable if it is lost within the year allowed for satisfying claims. (/) Where executors drew trust-funds out of one bank, and invested them on a deposit account at interest in another bank, such an investment not being authorised by the will, they were held to be personally hable, notwithstanding a clause in the will indemnifjring them against losses by a banker of money deposited for safe custody, (gr) It is a grave breach of duty in trustees or administrators taking out letters of administration to estates in this country, under powers-of-attorney from executors or next-of-kin abroad, to miTr the incomes raised by them from trust-properties, or the funds of the estate, in one common fund with their own moneys, and such a course of dealing may expose the trustees or administrators to criminal as well as civil liabilities, (fe) (a) Lewin, 12th Edn., 331, citing 160 ; Swinfen v. Moyle, 2 R. & M., 710 ; Prayag Doss, 33 I. Newton, 11 Hare, 160. (gr) Rehden v. Dctvis (1902), See also Bamanathan v. Swaminatha, 2 Ch., 304; Tirupatiroyudu v.

Where a trust is created for several persons in succession, as

Source page 222

147 Where a trust is created for several persons in succession, as wliere property is devised to trustees, upon trust, to permit x^ustee to A to enjoy tie rents and profits for his life, and after his prevent death an interest in the property is given to B, and the waste, person having the life-estate conunits, or threatens to Act'Tis"^** •oommit, any act which is destructive or permanently ' injurious to the trust-estate, such as cutting down timber or destroying houses, the trustee ought to sue for an injunction to restrain the tenants-for-life from committing the acts of waste. ^' There can be no doubt," said Lord Langdale, " that it is the duty ■of the trustee to protect the property against the improper acts of the tenant-for-life."(a) And if the persons in remainder are unborn, •or under disability, the trustees are bound to interfere. (6) This is the duty of the trustees, but if they do not interfere, the remainderman has a right to apply for the injunction, (c) So in the case of mort- gages, ifthe mortgagor or mortgagee in possession commits waste, •or threatens to commit it, an injunction will be granted, (i) An injunction can only be obtained to prevent the commission •of acts of active waste, not to restrain the tenant-for-life from allowing permissive waste, as by allowing the trust- ^a^ste'^^'^^ property to faU into disrepair.(e) " I think," said Wood, V. C., " that it is not possible to obtain a remedy against permissive waste indirectly through the medium of a trust created in the property. If I were to hold that, it would be most inconvenient. If every trustee is to be considered liable, though merely a trustee under a will, which devises the property to and to his use, as in Denton v. DenUm(f), in cases of permissive waste for want of repairs, the difficulty which is now felt of getting respectable persons to act as trustees would be increased. I can foresee no end to the demands which would be made upon trustees by remaindermen -coming into possession of the trust-property, who might think it not sufficiently repaired, if they might say to the trustees ' it was your duty to look after the tenant-for-life, you had the legal estate, and it was your business to see that he was performing all these trusts ; and as you have not done so, we shall fix you with the liability.' I think that such a doctrine cannot possibly be estab- lished."(^) On appeal(A), the decision of Wood, V.

of the trust, that it is the duty of a tenant-for-life to repair,

Source page 223

VL of the trust, that it is the duty of a tenant-for-life to repair, ' Equitas sequitur legem.' But even legal liability now is very doubtful, (a) Whatever be the legal liability, this Court has always declined to interfere against mere permissive waste : Lord Castle- main V. Lord Craven(b) ; there the Master of the Eolls said, ' the Court never interposes in case of permissive waste either to prohibit or to give satisfaction, as it does in case of wilful waste.' On this ground relief was refused in Wood v. Gaynon.(c) In that case a tenant-for-life had been guilty of permissive waste, and the plaintiff and one of the defendants, Benjamin Lyme, were the reversioners ; Lyme refused to join with the plaintiff in an action at law. The Master of the Eolls refused to assist the plaintiff, saying that as there was no precedent, he would not make one ; adopting the argument, that it would tend to harass tenants-for-life and joint- resses, and that suits of this kind would be attended with great expense in depositions about the repairs. The case of Re Shingley(e) was founded on the express obligation of the lunatic to repair. I certainly will not be the first to make one." If the person in possession of the trust-estate, the tenant-for- „ ^ life, commits active waste, he will not be permitted to trust may derive any benefit from his wrongful act, but the money not benefit arising therefrom wiQ be preserved for the remaindermen.(/ ) by waste. j£^ however, the tenant-for-life has expended money in permanent improvements on the trust-estate, he will be allowed credit for such sums.(g') If the cestui que trust is tenant-for-life without impeachment of waste, — ^that is to say, if the instrument creating the Tenants- txQst declares that the tenant-for-life shall not be pimish- witiiout able for waste, or the cestui que trust is tenant-in-tail after impeach- possibility of issue extinct, which is the case where an estate ment of jg limited to a man and the heirs of his body by a particular wife, and she dies without having had children, or none of her children are living at her death, the cestui que trust may commit ordinary waste.

standing for the shelter or ornament of the family mansion-house

Source page 224

149 standing for the shelter or ornament of the family mansion-house or grounds, (a) It is not necessary, in order to give the Court ground for interfering, that the plaintiff, whether trustee or remainder- man, should wait until a serious act of waste has been When committed(6) ; but the Court will interfere if a fair case of interferet^ prospective injury has been made out.(c) The mere apprehension or belief that waste will be committed is not .sufficient(d!) ; but if an intention to /jommit waste can be shown to exist, or if a man insists on his right, or threatens to coiflmit waste, there is a foundation for the exercise of the jurisdiction, (e) If the act of waste is trivial, the Court will not interfere, unless it appears that further waste is intended or threatened. (/ ) In order to obtain the assistance of the Court, it is only neces- sary to prove that a single act of waste, whether legal or equitable, has been committed. (5) The broad principle upon which a Court administering equity acts in restraining a person, who has only a limited interest in property of which he is in possession, from destroying or P"^'"c»ple injuring such property, is, that of protecting property from court acts, irreparable injury, and to prevent a malicious, wanton, and capricious abuse of their rights and authorities, by persons having but a temporary and limited interest in the subject-matter. By irreparable injury(A) is meant, not such injury as cannot by any possibility be repaired, but serious and material injury, which cannot be adequately compensated for by pecuniary damages, (i) Acting upon principles in some respects analogous to those upon which the Courts of Equity in England act in restrain- ing atenant-f or-life from committing waste, the Courts of ^^^^ ^^ this country have, in many instances, restrained a Hindu widow, widow from acts injurious to the property which she has (a) See Oarth y. J., Ch., 176 ; Gamp- £46 ; 1 Dick., 183, and the notes to bell v. Allgood, 17 Beav., 623 ; Cowley thatcase, IWh.andT. M., Habart, 3 M. &; K., 174; Haines v. Sebright, Taylor, 10 Beav., 75 ; Ghabildas v.

inherited from her husband.(») " Such acts," says Mr. MayTxe(6)r

Source page 225

VI^ inherited from her husband.(») " Such acts," says Mr. MayTxe(6)r " are of two classes :^fvrst, those which diminish the value of the estate ; second, those which endanger the title of those next in succession. First, under this head come all acts which answer to the description of waste, — ^that is, an improper destruction or deteriora- tion of the property. The right of those next in reversion to bring a suit to restrain such waste, was established apparently for the first time by an elaborate judgment of Sir L. Pemberton Leigh(c), " to show that there is danger to the pro- perty from the mode in which the party in possession is dealing with it, in which case, and in such case only, the Court will interfere. "(<i) If the widow has committed an act involving forfeiture of property, the reversioners will be entitled to immediate oosse"'' possession. (e) A suit will lie for possession with a view to the prevention of waste, either inchoate or threatened, though of course evidence of such a nature must be procured as will convince the Court that, but for its interference, ultimate loss to the heirs by succession will ensue. (/) The ground for removing the widow from the management of the property in these cases is, that she has proved herself to be unworthy of the confidence reposed in her.(g') . When it is shown that ultimate loss to the estate will result from the acts of the widow, the Court will appoint a (a) See Nundlal Baboo v.

receiver, who may be the reversionary heir. His appointment as

Source page 226

151 receiver, who may be the reversionary heir. His appointment as such is not by virtue of his reversionary right, but on a considera- tion ofwhat is most for the benefit of the estate. (a) Although the widow may be removed from the management of the property, she will remain entitled to the rents and profits, which must be paid to her by the receiver. It is not competent to the Court to put the reversioner into possession assigning mainten- ance to the widow. (6) Where a widow gave up possession of property upon a claim being made to it, and refused to have anything to do with it,— ^it was held, that the reversioners were entitled to sue the widow and the person to whom she had given up possession for a declaration of their title, and that the proper course for the Court to adopt was, to appoint a manager to collect the assets of the estate, who should account for them to the Court, and the Court should hold them for the benefit of the reversionary heirs, (c) If a widow has alienated the property, and it is in the hands of a third person, the reversionary heirs may sue the grantee to prevent waste or destruction of the property, whether by 'widow" moveable or immoveable, (d) But they will have no cause of action unless they charge waste or injury to the property which may affect their rights as reversioners, (e) The proper persons to sue to restrain a widow from com- mitting acts of waste are the immediate reversionary heirs. {/) In Bama Soonduree Dossee v. Bama Soonduree Dossee{g) it was held, that persons, whose rights are only inchoate and remote, cannot bring such a suit. But, according to the ^^°i?" ^ later decisions, it seems that contingent reversioners may sue. sue. Bui., 48 ; Kama- persad Kanoongoe, S.

^^"^ ^' long annuities, and no authority is expressly

Source page 227

152 CONVERSION OF PERISHABLE PROPERTY. [LBC. VI. said : " It appears to me that this is one of that class of cases which are referred to in the Shivagunga case(a) as being ex- ceptions to the general rule, which is there laid down. In page 191 of the judgment their Lordships allude to suits brought against Hindu widows by presumptive reversioners to restrain waste and the like, as being ' suits of a very special class, which have been entertained by the Courts ex necessitate rei.' They expressly say that, in such cases, the reversioner cannot get a declaration of his own title as against third persons ; but he is permitted to sue as the presumptive heir, because, unless he were allowed to bring such a suit, there would be no means of preventing a widow from doing perhaps irremediable mischief to the estate. And suits like the present, it seems to me, come clearly within the principle of that exception." And if the immediate reversioner is colluding with the widow(6). Collusion °^ refuses without sufficient cause to sue(c), if his where- by imme- abouts are not known (d), or if such reversioner happens to diaterever- be a limited owner(e), the contingent reversioners may sioner. ^^^ ^ protect the estate. A stranger cannot sue, even with the consent of the heirs, or by making them parties(/) ; nor can an assignee of a reversionary heir, even though he is the next reversionary heir to the husband after the assignor.(gi) Where a trust is created for several persons in succession, as Conversion where there is a devise to one for life with remainder of perish- over(A), and the subject-matter of the trust consists of able pro- property of a wasting description, such as leaseholds or ^^"^ ^' long annuities, and no authority is expressly trustees to convert, the Court assumes that it was the intention given to theof Indian Trusts the trust that the trust-estate should be converted into pro- Act, s.

p. 298 : " Very nice distinctions have been taken, and .'pickenng.

Source page 228

Section 298 — " Very nice distinctions have been taken, and

VI.] CONVERSION of perishable property. 153 the reversioners will run the risk of being damaged or destroyed ; and it becomes the duty of the trustees, unless a contrary inten- tion appears from the instrument creating the trust, to convert the property into property of a permanent nature(a), and their omission to do so will be a breach of trust. (6) The doctrine will apply, though there are no trustees, but the bequest is made to the tenant-for-life directly, (c) The leading case on this point is Howe v. Earl of Dartmouih.(d) In that case a testator had be- queathed aUhis personal estate to his wife for life with 5°^^"' remainders over ; part of the property consisted of annuities Dartmouth. and it was held, that they ought to be converted, and the proceeds invested in Government securities. Lord Eldon said : " Unless the testator directs the mode, so that it is to continue as it was, the Court imderstands that it shall be put in such a state, that the others may enjoy it after the decease of the first, and the thing is quite equal, for the bequest might consist of a vast number of particulars ; for instance, a personal annuity, not to commence in enjoyment tiU the expiration of twenty years from the death of the testator, payable upon a contingency perhaps. 298 : " Very nice distinctions have been taken, and .'pickenng. must have been taken, in determiniag whether the tenant- for-life is to have the iacome of the property in the state in which it is at the time of the testator's death, or the income of the produce of the conversion of the property. The principle upon which all the cases on the subject turn is clear enough, although its applica- tion isnot always very easy. "All that Howe v.

the duty of the Court to carry into effect the apparent intention

Source page 229

154 CONVERSION OP PERISHABLE PROPERTY. [LeC. VI ^ the duty of the Court to carry into effect the apparent intention of the testator. How is the apparent intention to be ascertained if the testator has given no particular directions. It is equally clear that if a person gives certain property specifically to one person for life, with remainder over afterwards, then, although there is a danger that one object of his bounty will be defeated by the tenancy-for-life lasting as long as the property endures, yet there is a manifestation of intention which the Court cannot overlook. The intention is the other way, so far as it is declared, and the terms of the gift, as a declaration of intention, preclude the Court from considering that he might have meant that it should be converted. Those are questions of difficulty, because the Court has to find out what was the intention of the testator as to the mode of management and as to the mode of enjoyment." The rule does not proceed upon the assumption that the testator intended his property to be sold, except so far as a testator may be presimied to intend that which the law will imply from the directions in his will.

trustees(a), for such a power is given to them with a view to the

Source page 230

155 trustees(a), for such a power is given to them with a view to the security of the property, and not with a view to vary or affect the relative rights of the legatees, and indeed shows that the property was intended to be converted. (6) So, the rule will not apply if it clearly appears that the author of the trust intended the property to be enjoyed in specie.{c) " The question," said Lord Langdale(«?), " does not depend on the legacy being specific or not, but you are to collect from the will whether the testator intended that the property should at all events be enjoyed by those in remainder after the expiration of the prior interest."(e) If the property is not to be converted untU a certain time has expired, the trustees will not be justified in converting it until that time arrives. {/) If there is no indication in the will that the property is not to be converted, there must be a conversion. (^) The leaning of the Judges of the Court of Chancery has been rather against, than in favour of, the application of the rule, and the effect of the later cases has been to allow small indications of intention to prevent its taking effect. (A) Where a testator, after giving estates in succession, empowered his trustees to retain all or any portion or portions of his trust- estate in the same state in which it should be at the time of his decease, or to sel-1 or convert the same, or any part thereof, into money in such manner and for such prices and under such terms and conditions as they should, in their absolute and uncontrolled discretion, think fit, it was held the case was taken out of the rule.(i) A trustee is bound to be impartial in executing the trust, and must not benefit one cestui que trust at the expense of another. Thus, where a testator by his will desired his te^mpar- trustees to give up his farm to his nephew, the plaintiff, if tial. the landlord would accept him as tenant ; and in that case Indian Trusts- he bequeathed to him the farming^stock ; and the testator > ^- ^7- (a) Lord v. Godfrey, 4 Mad., 455 ; negatiTe the effect of the rule, Lewin, In re SewelVs Estate, L. 80 ; Re Bland (1899), 2 Ch., 336. (g) Pickering v. Morgan, 14 Beav., Cr., 289 ; Morgan v. 72 ; Re Llewellyn's Trust, 29 Beav., 173.

also gave some real property to the plaintiff, and gave legacies and

Source page 231

VI. also gave some real property to the plaintiff, and gave legacies and annuities to the plaintiff's father, mother, and sisters, and other persons including the trustees, one of whom was steward to the landlord, and there were hardly any assets to pay the legacies and annuities, if the plaintiff took the farming-stock, upon which the trustees represented the case to the landlord, who left it to their decision whether the plaintiff should be accepted as tenant; and they accordingly refused to let him be accepted, unless he executed a deed making over the devised real estate to pay the legacies and aimuities, — ^it was held, that it was a breach of trust on the part of the trustees to endeavour to induce the landlord to refuse his consent to the plaintiff having the tenancy, and that the deed must be set aside. J., said : " The trustees honestly believed that the testator had made a mistake. Still they were the trustees of that will, and their duty was to carry its trusts into effect impar- tially ;they had no right to use the power given to them by their position as trustees ; or any other power which they had, as a means of making a new will for the testator ; for that is what their proceed- ings come to. . . . It was a breach of duty on the part of the trustees to endeavour to induce the landlord to refuse his consent on any grounds to what the testator showed by his will that he wished and intended."(a) If the author of the trust has reposed a discretionary power in the trustees, either to do or to abstain from doing certain ^f ^t^'^^'tees things, the Court has no power or jurisdiction to control the not inter- trustees in the exercise of their discretion, so long as they act fered with. in good faith, and their determination is not influenced by Jj>^d^ian Trusts improper motives.(6) "If," said Wigram, V. C.(c), "the ^g. ' ' gift be subject to the discretion of another person, so long as that person exercises a sound and honest discretion, I am not aware of any principle or authority upon which the Court should deprive the party of that discretionary power where a proper and honest discretion is exercised." ' And in the case of Gisborne v. Gisborne{d) Lord Cairns said : "No doubt various cases have occurred in the Court of Chancery, in which, either from the trustees submitting to the Court the question of how they ought to exercise a power or a trust reposed in them, or from questions having been raised by the parties interested as to whether a trust for maintenance or a similar trust had actually arisen and ought to be acted upon, decisions have been arrived at by the Court which I should be very unwilling to throw the least doubt upon ; but those decisions appear to me not at all to touch the present case, where, as I shall submit to your Lordships, you have the trustees made the absolute masters of the question, where you (a) Ellis V.

have them armed with a complete and uncontrolled discretion,

Source page 232

157 have them armed with a complete and uncontrolled discretion, and where they come before you stating that they are prepared to exercise that discretion within the limits within which it is con- fided to them by the will."(a) Thus the Court will not interfere with the exercise of a discre- tionary power of selecting particular objects of the trust. (6) For instance, where property was devised to trustees upon Selecting trust for such of the testator's children and grandchildren, trust.*" or nephews and nieces, as the trustees should think fit, and the trustees gave all to one, the Court refused to interfere, (c) So the Court will iftt interfere with a power of sale given to trustees(rf), or with a discretionary power to abstain from paying a legacy, (e) So, where a testatrix left £1,000 upon a condition precedent, but " left her executor at liberty to give the said sum it he found the thing proper," the Court refused to interfere, saying : " The executor says he did not think it proper to advance the legacy. Nothing appears in the conduct of the young man which disquali- fied him from taking, but it would be quite contrary to the provi- sions ofthe will to hold, that the power given to the executor at his discretion to advance the legacy, gave the legatee a right to claim it absolutely. If that were so, the condition in the will, and the power given to the executor of dispensing with it, would be frustrated. Is the Court to decide upon the propriety of the executor withholding the legacy ? That would be assuming an authority which is confided by the will to the discretion of the executor. It would be to make a will for the testator instead of expounding it."(/) And the Court will not interfere with the trustees' discretion as to one of several authorized modes of investment(^), although the result may be to vary the relative rights of }'^°^^^ °* ^ ,1 ^ ■ ^ ^ ^/ix Tj 1- • J- i 5 "^ "i investment, the cestuis que trustent.yh) If, however, mfants are inter- ested, the Court will interfere if the proposed securities are clearly unsafe, (i) Nor will it interfere with the discretion of the trustees (a) See also Brophy v.

as to maintenance of children(a), unless it thinks that the discretion

Source page 233

158 DISCRETION OF TRUSTEE. [LeC, VI. as to maintenance of children(a), unless it thinks that the discretion is not being properly exercised for the benefit of the infants.(6) Where the trustees had " an uncontrolled and irresponsible discre- tion," the Court refused to interfere, there being no proof of maM fides, although the trustees did not appear to be acting judiciously, (c) And the Court will not interfere with the mode of executing the trust, (d) When a scholarship was to be awarded to the best candi- date at an examination, the trustees were allowed to withhold the scholarship from the candidate that obtained the highest number of marks, on the ground that the scholarship was too valuable for his deserts, (e) But where the power is accompanied^ with a duty and meant to be exercised (as a power of leasing), the Court will compel the execution, or execute it in the place of the trustees. So, where the trustees had a power-of-sale '' if they should consider it advisable but not otherwise," it was held, that the power, though discretionary in form, was given to the trustees for the purposes of the will, and if those purposes could not be effected without the exercise of the power, they were bound to exercise it.(/) When such a power is conferred upon trustees to be executed by them at a fixed period, and after they have come to a judgment as to the conduct of the individual to be affected, they cannot divest them- selves ofthe power, or execute it until the time appointed ; nor can they enter into any anterior contract respecting it.{g) Where a trustee had an absolute discretion to apply the . trust-funds for certain charitable purposes as he might power by think fit, and he died without exercising the power inter -will. vivos, but by his will gave definite directions as to the application of the funds, it was held that the power was duly exercised. (^) Trustees to whom discretionary powers are given, are not bound to state their reasons for exercising the powers in a particular way. But if they do state their reasons, and it appears that their premises are wrong, the Court will then set aside the conclusion, (t) (o) Collins V. R., 557 ; Ee Bryant (1894), 1 Ch., 472 ; Brophy v. Ee Wise (1896), 1 Ch., 281. (c) Tabor V. R., 10 Ch. (A) Lewin, 12th Edn., 769, citing Div., 273 ; see also Marquis Camden v.

A trustee who sets up a title to moveable property may be

Source page 234

159 A trustee cannot set up a title to the trust-property adverse to that of his cestui que trust. Vincent{a), tenants-at-will, who came into possession Trustee under a letting by a receiver in the Court of Chancery, up"titleto' were, by the neglect of the parties in the cause, allowed to trust-pro- remain in possession for a great number of years, and were perty. not called on for their rent ; they levied fines, and insisted yf^t s" 14"^'* on them as a bar : but Lord Hardwicke said : " No, you gained that possession as tenants under the receiver of the Court ; you gained that possession therefore in confidence, and you shall not by means of that possession, defeat the title of the persons for whom you had the possession," and he would not suffer the fine and non-claim as a bar.(6) " Where," said Knight Bruce, V. C, " a person knowingly and expressly acquires the possession of property as a trustee merely, or being in possession makes himself by contract, expressly and without qualification, a trustee of it, he cannot be allowed effectually to assert against the trust, at least as a defendant in a suit seeking the performance of the trust, any title paramount and adverse to the trust which he may himself have ; he must assert it (if at all) without deriving — ^he must assert it so as not to derive — any advantage for it from the possession which he has as trustee, or had in that character, "(c) , If, however, the trustees become aware of a title in a third person to the trust-property, and the cestuis que trustent are entitled to claim the property absolutely, the trustees ^w^T^^ may refuse to dehver over the fund untU the question is settled. ((Z) And trustees cannot set up the adverse title of a third person against their cestuis que trustent. {e) A trustee who sets up a title to moveable property may be compelled to deliver it up to his cestui que trust. The Specific Rehef Act (I of 1877), s. 11, provides, that " any Delivery up person having the -possession or control of a particular pimt^ article of moveable property, of which he is not the owner, may be compelled specifically to deliver it to the person entitled to its immediate possession, when the thing claimed is held by the defendant as the trustee of the claimant ; " and the following illustration is given : " A, proceeding to Europe, leaves his furni- ture incharge of B as his agent dming his absence. B, without A's (o) CSted in Lord Pomfret v.

[Lec. VI.

Source page 235

VI. authority, pledges the furniture to C, and C knowing that B had no right to pledge the fumitui-e, advertises it for sale. C may be com- pelled todeliver the furniture to A, for he holds it as A's trustee." It may happen that there is no cestui que trust to claim the property, and no person to claim it through the settlor. Failure of According to Englidi law, before the Intestates Estates Act, cestui que trust. 1884:(a), there was no escheat of a trust in fee of lands(6), and the trustee retained the estate (c) if a cestui que trust under that statute dies intestate without next-of-kin, the trust- property goes to the Crown.(d) I am not aware of any case in which the question has been raised in this country, but the general prerogative of the Crown to all heirless property, subject however to any trust or charge properly created, will prevail, (e) It is the duty of trustees to afford to their cestuis que trustent Trustee accurate information of the disposition of the trust-fund — to keep all the information of which they are, or ought to be, in accounts. possession(/ ) ; and to keep clear and distinct accounts of the Indian Trusts Act, s. 19. property, (g') " It is the first duty of an accounting party,, whether an agent, a trustee, a receiver, or an executor, for in this respect they all stand in the same position, to be constantly ready with his accounts."(fe) And if the trustees destroy books of account, very cogent reasons must be given to satisfy the Court that the destruction was proper or justifiable.(i) In the case of a trust for sale, the cestuis que trustent have a right to say to their trustees — " What estates have you sold ? And those who claim imder them have the same right."(_7 ) If a trustee chooses to mix his accoimts with those of his own trading concern, he cannot thereby protect himself from producing the original books in which any part of those accounts may be inserted. (S) If a trustee adopts and sanctions improper accounts by his co-trustee, he will be liable for any default.(i) A legatee (a) 47 & 48 Vic, c, 71, s.

Lee. VI.] GOOD FAITH. 161

Source page 236

161 has a clear right to have a satisfactory explanation of the state of the testator's assets, and an inspection of the accounts(a) but he is not entitled to a copy at the expense of the estate.(6) When all the matters relating to the trust have been finally settled, the trustees are entitled to the possession of the ^ . vouchers, as their discharge to the cestuis que trustent, who, however, will have a right to inspect them, and to take copies at their own expense, (c) If the inability or refusal of the trustees to account renders a suit necessary, they must pay the costs of it.(d) The „ matter of costs, however, is within the jurisdiction of the Court ; and if there has been no actual misconduct, the Court may limit the payment of costs to the period of bringing the action or of the hearing or otherwise according to the circumstances of the case.(e) In taking accoimts against a trustee when he is to be fixed with a personal liability, his good faith is to be considered, _ Af-fu and every fair allowance is to be made in his favour, especially if the demand against him is one which arose many years previously, and the cestui que trust was at the time cognizant of all the matters connected with it.(/) I may here refer to the question whether the managing member of a joint Hindu family can be sued for an account. The Manaeine manager of a Hindu family is " neither a partner nor a member o£ principal nor an agent of the family but a sort of representa- Hindu tive owner, his independent rights being limited on all sides ^™"y' by the correlative rights of others and burdened with a liability, co-extensive with his ownership, to provide for the maintenance of the family."(gf) His position is not analogous to anything known to English law. (A) The distinction, however, in the incidents of a joint family under the laws of the Dayabhaga and the Mitakshara has led to a (a) Ottley Y. Jackson,15Bea,v., 191 ; Payne Re Tillot (1892), 1 Ch., 86 ; Re Dartnall v. Gilbey, , supra ; see Re 670 ; and see Payne v. Ormonde, Jac, 120. (j) Cowell, Tagore L. Askew, 11 Beav., 145 ; an agent with delegated authority in a Wroe V.

difference of judicial opinion. While under the Dayabhaga the

Source page 237

162 LIABILITY OF KARTA TO ACCOUNT. [LeC. VI. difference of judicial opinion. While under the Dayabhaga the position of the manager has been likened to that of a trustee in relation to the other members of the family, under the Mitakshara, the analogy is not recognised, (o) In Bengal the decisions on this point were conflicting ; but in the Full Bench case of Abhaya Chandra Boy Chowdhry v. Pycwi Mohan Guho(b), the question was decided in the affirmative. J., said :— " The members of a joint Hindu family are entitled to the family property, subject to such dispositions of it as the managing member is entitled to make, either by virtue of the power which is given hiiin by law as manager, or of the powers that may be given to him by the consent of the other members of the family. Subject to the exercise of these powers, and to any disposition of any portion of the family property which may have been made by virtue of them, the other members of the family are clearly interested in that property.

Lee. VI.] DUTIES of trustee as to investment. 163

Source page 238

VI.] DUTIES of trustee as to investment. 163 <iisclose what tie has done, in other words, will make him account for his administration of the property. It is the necessity for discovery, as the English lawyers term it, in order to protect the actual owner's right and interest which founds the jurisdiction of the English €ourts of Equity in cases of this sort." The rule of UabUity to account appUes only to a family governed by the Dayabhaga law. An individual member of a tarawad governed by the Maru- makkatayam nile has no right to an account from the kara- navan.(rf) We have now to consider what are the duties of a trustee with respect to the investment of trust-moneys, (e) In a Duties of properly drawn instrument creating a trust, express direc- trustee as tions will always be found as to the securities upon which t° invest- the trustee is to invest the trust-funds, and the trustee ™^"*- is boimd to adhere strictly to the modes of investment prescribed.(/) If he does not do so, he commits a breach of trust, and will be liable for any loss that may arise ; whereas, if he invests in the manner directed by the instrument of trust, he will not be liable in case of loss. But there are other cases where the instrument creating the trust is of an informal character, and does not contain any directions as to investment. It is the duty of the trustee to make the fund productive for the benefit of the persons interested, and in order to do so he must invest it in some form of security.

Where per- ^j^g ^j^g^ expressly authorizes such a

Source page 239

VI. a trustee will not be justified in investing upon any but authorised securities, (a) If a fund is properly invested, it is a clear breach of trust for the trustees to convert it into money and invest the proceeds in unauthorized securities. (&) Trustees may not invest on personal security(c), even though larger interest may be gained, for such an investment is a se^cur^y. species of gaming((Z) ; and it makes no difference that the loan is on joint security. (e) A promissory note is evidence of a debt ; but it cannot be considered as a security for money.(/) The rule, that a trustee may not invest on personal security, is one that " should be rung in the ears of every person who acts in the character of trustee, for such an act may very probably be done with the best and most honest intention, yet no rule in a Court of Equity is so well established as this."(5f) And trustees leaving money outstanding on personal security in which the testator himself had invested, will be liable for any loss, unless they can show that an attempt to recover the money would have been fruitless, (h) Investments in the stock or shares of any private company are not justifiable without express authority, and the companies. trustees Will be liable for loss if the company fails or the shares become depreciated, (i) Trustees do not commit a breach of trust by lending out the trust-fund on personal security, if the instrument creating Where per- ^j^g ^j^g^ expressly authorizes such a mode of investment.( J ) rity allowed. ^^ ^he trustees are imperatively directed to invest in certain forms of investment, they are bound to obey the direction(i), and when there is an express authorization to allow money to remain on an unsatisfactory security, for the purpose of convaiiendng a purchaser, they will not be wrong in doing so.{l) But a power to place out the trust-fund at the trustees' discretion, will not (o) See In re Davis, Davis \. DeSouza, was held that with a reasonable 12 B. R., 190 ; Tirupati Royudu prospect of repayment, trustees may V. Lakshmi Narasimha, 38 Mad., 71. lend on personal security. (6) Kellaway v. Lord Essex, 2 Brew, 81 (»), per Lord Hardwicke. Dring, 2 Cox, 1, per (1) Re Hurst, Addison v.

justify an investment on such security, (a) So a power to invest

Source page 240

165 justify an investment on such security, (a) So a power to invest upon such security as to the trustees seems expedient(6), or on the " best and most sufficient security"(c), or " on good private secu- rities"(<Z), will not justify investments on personal security. Nor will a trust to place the trust-fund " out to interest or other way of improvement" authorize an investment in trade. (e) And a trust to invest at " the discretion of the trustees " will not justify them in investing in securities of foreign states, even though the testator approved of such investments.(/) "Where the trustees of a sum of money for A for life, remainder for her children, were authorized by the settlement to lend the trust-fund upon such real or personal security as should be thought good and sufficient, and the trustees lent it to a person in trade whom A had married, and the money was lost, they were made responsible for the amount. R., said : " The authority did not extend to an accommodation ; it was evident the trustees had, upon the marriage, been induced to accommodate the husband with the sum which they had no power to do."(5r) The liability of the trustees is all the greater when they lend in consideration of a bribe. (A) Where trustees of a marriage-settlement were authorized, with the consent of the husband and wife, to invest the funds on such security, " either real or personal," as they, with such consent, should think proper, and at the date of the marriage, part of the trust-funds were outstanding on the security of the husband's note-of-hand, the Court allowed the investment to be continued on the husband executing a bond to the trustees for the amount of the loan.(i) Trustees must not invest in such a manner as to benefit one or more of the cestuis que trustent without having regard to the interests of the others. If they do so, and any loss qutiwT results, they will be liable.(j) Even where the written not to be consent of the tenant-for-life is required to a change of benefited at investment, the trustees are bound, if the fund is impro- othe"s^^ perly invested, to re-invest it so as to protect the interests of the remainder- men, although the tenant-for-life objects to the re-investment. (A;) (a) Pocock V. Ridehalgh, 1 Beav., 109, 177. per Turner, L. Stuart, (e) Cocfcv.Good/eZZow, 10 Mod., 489.

investment. ments, but they should be careful to see that the securities

Source page 241

VL Wheie the instrument of trust contains a power of investment. Consent of ^^* requires the consent of any of the cestuis que trustmt or cesiuis que of the trustees, to the investment or to a change of securi- trustent to ties, all the conditions of the power must be strictly followed, change. j£^ however, the terms of the power have not been complied with, a cestui que trust, who is sui juris, and who has acquiesced in the investment, cannot afterwards make any complaint, (a) So if the power authorizes an advance to three on a joint interest, an advance to two is not justifiable.(&) . . In some cases trustees may continue existing invest- investment. ments, but they should be careful to see that the securities are good.(c) " Trustees may, as they generally are, be expressly empowered . to invest on real as well as Government securities, and secai^es where this is the case, and there is a power to vary securi- ties, the trustees may safely sell out Government securities, and invest the proceeds on a mortgage ; for, in this case, although the tenant-for-li£e may obtain a higher rate of interest, yet no injury is done to the remainder-man, as the capital is a constant quantity ,^ and if the tenant-for-life live long enough, he himself will have the benefit. But there is no ground for this apprehension, for if the trust authorize the purchase of stock at aU, the trustees cannot be wrong in deaUng with it at the market- price of the day. No doubt if there were a sudden fall imder peculiar circmnstances, the trustees should not, without good reason, sell out at the very moment of casual depreciation ; but if the power be bond fide exercised, the mere fact of a depreciation below the bought price cannot per se constitute a breach of duty."(d) Where trustees are empowered to invest on mortgage, they should not, in the case of land, invest more than two-thirds Investment gf ^^e actual value of the estate ; in the case of houses, not gage. ' more holds under anythan one-half. circumstances, And they as these are wasting should not invest securities. in lease- Nor should they, under any circumstances, invest on the security of a second mortgage, (e) (a) See Lewin, 12th Edn., 349. Martin, T. (e) See further as to investment , & R., 239 ; Ames v.

Lee. VI.] INVESTMENT OF TRUST-MONEY.

Source page 242

Section 20 — 21. and on no others:

Trustees empowered to lend the trust-funds on mortgage may not lend to one of themselves, (a) The reason is, that there is Trustees the possibility of a conflict between the trustees' duty and may not interest, and the cestuis que trustent are entitled to have the lend to themselves. impartial judgment of all the trustees as to the sufficiency of the security. (6) Trustees must be careful, when they advance money on mortgage, not to pay over the money to the mortgagor until ^o^toleJ?"^ the security is ready, for in case of loss by fraud they will be money, personally liable, (c) The Court will not, so long as an estate remains to be adminis- tered init, allow a purchase, or a mortgage, or any other investment to be made, unless the Court is satisfied of its courtto°' safety. The reason is, that the Court has to protect the investment, property for all claimants, and even where the trustees have an undisputed power to make a purchase, or to make a mortgage, a reference is usually made to ascertain the propriety of the invest- ment in all respects. ((Z) In England, the duties of trustees as to investment are defined by various Statutes, (e) The Indian Trusts Act(/) makes provision for particular securities : " Where the trust-property consists of money and cannot Investment be applied immediately or at an early date to the money. purposes of the trust, the trustee is bound (subject of trust- Indian to any direction contained in the instrument of Trusts Act, trust) to invest the money on the following securities SS. 20-21. and on no others: — {a) in promissory notes, debentures, stock or other securities of the Government of India, or of the United Kingdom of Great Britain and Ireland ; (b) in bonds, debentures and annuities charged by the Imperial Parliament on the revenues of India ; Provided that after the fifteenth day of February, 1916, no money shall be invested in any such annuity being a terminable (a) See Exparte Lacey, 6 Ves., 625 ; 265 ; Broadhvrst v. Ld., (1911), C, 16; Re Speight, 22 Ch. A.), 1 Ch., 618; Lagunas Nitrate Co. v. Harkin (1896), 2 Lagwnas Syndicate (1989), 2 Ch., 618 ; Ch., 415.

annuity, unless a sinking fund has been established in connection

Source page 243

168 INVESTMENT OP TRUST-MONEY. [LeC. VI. annuity, unless a sinking fund has been established in connection with such annuity ; but nothing in this proviso shall apply to investments made before the date aforesaid. (bb) In India three and a half per cent, stock, India three per cent, stock, India two and a half per cent, stock or any other capital stock which may at any time hereafter be issued by the Secretary of State for India in Council under the authority of an Act of Parliament and charged on the revenues of India ; (c) in stock or debentures of, or shares in, Eailway or other Companies the interest whereon shaU have been guaranteed by the Secretary of State for India in Council or by the Government of India or in deben- tures of the Bombay Central Co-operative Bank, Limited, the interest whereon shall have been guaranteed by the Secretary of State for India in Council ; (d) in debentures or other securities for money issued, under the authority of any Act of a Legislature established in British India, by or on behalf of any municipal body, port-trust or city improvement trust in any Presidency-town, or in Rangoon Town, or by or on behalf of the trustees of the port of Karachi ; (e) on a first mortgage of immoveable property situate in British India : provided that the property is not a leasehold for a term of years and that the value of the property exceeds by one-third, or, if consisting of buildings, exceeds by one-half, the mortgage money ; or (/) on any other security expressly authorized by the instrument of trust, or by any rule which the High Court may from time to time prescribe in this behalf : Provided that, where there is a person competent to contract and entitled in possession to receive the income of the trust-property for his life, or for any greater estate, no investment on any security mentioned or referred to in clauses (d), (e) and (/) shall be made without his consent in writing." These rates " do not apply to investments made before this Act comes into force, or shall be deemed to preclude an investment on a mortgage of immoveable property already pledged as security for an advance under the Land Improvement Act, 1871, or, in case the trust-money does not exceed three thousand rupees, a

Where trustees are bound by the terms of their trust to invest

Source page 244

169 Where trustees are bound by the terms of their trust to invest the money in the public funds, and instead of doing so, retain the money in their hands, the cestuis que t/rustent may casTof non- elect to charge them, either with the amount of the money investment, and interest, or with the amount of the stock which they might have purchased with the money, (a) The doctrine of the Court, when it appHes this rule, is, that the trustee shall not benefit by his ■own wrong. If he had done what he was bound to do, a certain amount of Government securities would have been forthcoming for the cestuis que trustent. And therefore, if called upon to have such securities forthcoming, he is bound to do so ; just as, in ordinary cases, every wrong-doer is bound to put the party injured, so far as the nature of the case allows, in the same situation in which he would have stood if the wrong had not been done.(6) But the grounds on which the right of election in the cestuis que trustent rest, wholly faU in a case where a trustee, having an option to invest in Government securities, or on the security of immoveable property, neglects his duty and carelessly leaves the trust-funds in some other state of investment. In such a case, the cestui que trust cannot say to the trustee — " If you had done your duty, I should now have had a certain sum in Government securities, or the trust-fund would now consist of a certain amoimt of Government securities." It is obvious that the trustee might have duly discharged his duty, and yet no such result need have ensued. In such a case the trustee is liable for the principal and interest only.. "Where a man is bound by covenants to do one of two things, and does neither, there in an action by the covenantee, the measure of damage is in general the loss arising by reason of the covenantor having failed to do that which is least, not that which is most, beneficial to the covenantee : and the same principle may be applied by analogy to the case of a trustee failing to invest in either of two modes equally lawful by the terms of the trust. . The trustee is answerable for not having done what he was bound to do, and the measure of his responsibility should be what the cestui que trust must have been entitled to in whatever mode that duty was performed, "(c) In Raphael v. (a) Shepherd v.

Boehm(a) Lord Eldon said : " Where there is an express trust tc

Source page 245

REMEDY IN CASE OF WRONGFUL INVESTMENT. [LBC. Boehm(a) Lord Eldon said : " Where there is an express trust tc make improvement of the money, if the trustee will not honestly endeavour to improve it, there is nothing wrong in considering him as the principal to have lent it to others, and as often as he ought to have received it and lent it to others, if the demand be interest, and interest upon interest." The case was re-argued before Lord Ersldne, who agreed with Lord Eldon(6) ; and Lord Eldon subse- quently expressed his opinion that his original judgment was right, (c) Where a trustee who was directed to invest the residue of his testator's estate in consols, and to accumulate the dividends, invested it on mortgage of real estate, he was held hable to make good the amount of stock which would have been purchased in consols, together with the amount of accumulation which would have been produced' by a proper investment of the dividends of such stock. (5) When the accumulation was directed oiJy during the minority of a beneficiary, the fund going over at 21, and the trustee neglects to hand it over or to invest it on the determination of minority, he will be liable for compound interest, (e) When the trust-moneys have been employed in trade, recent authority inclines to compound interest as the proper measure of liability.(/ ) So an executor who neglects to pay debts, or who, after pajing debts and legacies, neglects to account for the surplus, or an assignee who neglects to pay dividends, will be liable to pay interest and it is no excuse that he himself derived no benefit from the moneys in his hands, (g') Where, however, an executor in good faith retained a balance to which he thought himself entitled, he was not charged with interest, (i^) If trustees having power to invest on certain securities, and Remedy *° '^^^Y ^^^^ investments from time to time, realize money in case of properly invested, for the purpose of investing it in a secu- wrongfui rity not warranted by the instrument of trust, the cestui que investmen . ^^^^^ ^^^^ ^^^ remedies : First, he may compel the trustees to restore the trust-fund to its original state. The Court will not treat the sale as lawful, and the investment as unlawful, so as ta (a) 11 Ves., 107. Foxall, 15 Beav., 388 ; (6) 13 Ves., 407. Walrond, 29 Beav., 586 ; (c) 13 Ves., 590 : see also Dornford Gilroy v. Dornford, 12 Ves., 127. contia, Attorney-General v.

satisfy tlie trust by replacing the money, but the whole will be

Source page 246

171 satisfy tlie trust by replacing the money, but the whole will be treated as one unjustifiable transaction and the original security must be replaced, — ^that is to say, i£ the fimd was originally invested in Government securities, it will not be sufficient to refund the money realized by the sale ; but an equivalent amount of Govern- ment securities must be purchased(a) and the intermediate dividends must be replaced(6) ; or, secondly, the cestui que trust may require the trustees to account for the money received on the sale with interest if that would be most advantageous to him.(c) In Eng- land, the rate of interest is 5 per cent.{d) In this country it would be at the rate of 6 per cent., the Court-rate of interest. When trustees have committed a breach of trust by an improper sale of the trust-fund, they are not discharged from the consequences of the breach of trust by replacing the fund in some security, not the security the sale of which constituted the breach of trust. (e) In a case where the trustee did not seek to make anything himself, but was honourably unfortunate in having yielded to the importunity of one of the cestuis que trustent, it was held that, although the trustee was bound to replace the specific stock, the cestuis que trustent should not have the option of taking the proceeds with interest. (/) In the case of the insolvency of a trustee, the cestui que trust has the option of proving for the proceeds of the sale with interest, or for the cost of the specific stock at the time of of trustee^ the insolvency with the interim dividends, (gf) Where the instrument of trust directs the trustees to raise money by the sale or mortgage of the trust-property, they Duties of may act without the leave of the Court. (A) But if a suit trustees respecting the trust has been instituted, the trustees cannot *•"■ sale or deal with the property without the leave of the Court, for by '""''tgage. the suit the execution of the trust is in the hands of the Court, (i) " Private contracts, therefore, after the institution of a suit, can only be entered into by trustees subject to the approbation of the (a) Phillipson v. Beddington, 5 Ves., 794 ; Norris v. Stace, 4 Ves., 620 ; Jones v. (6) Davenport v. Stafford, 14 Beav;, Foxall, 15 Beav., 392. Weston, 3 Drew., 394 ; (c) Bostock V.

Court, and a condition is commonly annexed that the contract

Source page 247

172 TRUSTEE FOR SALE OR MORTGAGE. [LeC. Court, and a condition is commonly annexed that the contract shall be null and void, unless the sanction of the Court be obtained within a limited period. Cases have occurred where, from acci- dental circumstances, the sanction has not been obtained within the time, and then by the death of the purchaser the contract has dropped to the ground, and the representatives of the purchaser have not felt themselves justified in renewing it. The better mode would be, to give liberty to the purchaser at any time after the expiration of a limited period, but before any confirmation by the Court, to determine the contract."(a) A trustee for sale is bound to sell the trust-property to the best Trustee advantage, and to use aU reasonable diligence to obtain a bound to proper price. (6) If he is negligent in conducting the sale, sell to best as by not advertising(c), or makes a misstatement as to the a vantage. condition of the property, whereby the price is reduced((i), he will be personally liable for any loss occasioned. All the trustees are equally liable, and cannot escape responsibility, on the ground that the conduct of the sale was delegated to one of their number, (e) If, however, a trustee enters into a contract for the sale of trust- property, he is not bound to break off the contract in order to sell to another . person who makes a higher offer(/) ; and when there are two ofEers, and it is not quite clear which is the most advan- tageous, the trustee will not be liable for refusing to accept the offer preferred by the cestui que trust. (g) The trustees must pay equal and fair attention to the interests of all persons concerned. If they, or those who act by their to interes" authority, fail in reasonable diligence, — ^if they contract of all parties, under circumstances of haste and improvidence, — ^if they make the sale with a view to advance the particular purposes of one party interested in the execution of the trust at the expense of another party — a Court of Equity will not enforce the specific performance of the contract, however fair and justifiable the conduct of the purchaser may have been. (A) So, specific perform- ance will not be enforced against trustees, if they have entered into an agreement by mistake to sell at an inadequate consideration (i) ; nor, where there has been a substantial misdescription on their part, will specific performance with compensation be enforced (a) Lewin, 12th Edn., 499. ( / ) Goodwin v.

against thein(a) ; and in no case will specific performance be granted

Source page 248

VI.] against thein(a) ; and in no case will specific performance be granted if there has been a breach of trust.(6) The sale of property at a grossly inadequate value is a breach of trust which affects the title in the hands of a purchaser, (c) " The usual course," said Lord Eomilly(a(), " is, for cestuis que trustent, who are the persons most interested in the matter, and who have the strongest motive for obtaining the highest possible price, to enter into a conditional contract of sale, and then to obtain the assent of the trustee, who, when he has satisfied himself that the sum proposed to be given for it is the value of the property, ought to sanction a sale which is beneficial for the persons for whom he is trustee." This of course is only when the cestuis que trustent are persons competent to contract. The trustee before sanctioning a sale should have a „ , .. valuation of the property made by some qualified person, (e) An absolute trust for sale, from which it appears that it was the intention of the author of the trust that the property Absolute should be converted, will not authorize the trustees in trust for mortgaging. (/) But where the trustees are authorized to sale will not sell in order to raise money for a particular purpose, as for mortgage, instance, to pay debts, and it does not appear that it was the intention of the author of the trust that the property should be converted(5), or when the trust for sale is coupled with a discretion for postponement and in the needs of management in the meantime a power to mortgage can be implied(ii), the trustees may raise the necessary money by means of a mortgage. " Generally speaking," said Lord St. Leonards(i), " a power of sale, out-and-out, for a purpose or with an object beyond the raising of a particular charge, does not authorize a mortgage ; but where it is for raising a parti- cular charge, and the estate itself is settled or devised subject to (a) White v. Richardson, i Beav., (d) Palairet v. Spofforth, 1 Beav., Oceanic Steain Navigation Company v. A. ), 586 (this was a case of depre Walker v.

174 TRUSTEE TO MAKE GOOD TITLE.

Source page 249

174 TRUSTEE TO MAKE GOOD TITLE. rLec. VI. that charge, there it may be proper, under the circumstances, to raise the money by mortgage, and the Court will support it as a conditional sale, as something within the power, and as a proper mode of raising the money." Where a trust for sale does not prima facie imply a power to grant a lease, an agreement to lease cannot be enforced, (a) Exe- cutors, who are quasi trustees for sale will not in the absence of special circumstances, be justified in granting leases and the burden is on the lessees to prove that the leases were necessary ia the interests of the persons entitled to the property. (6) But neither executors nor trustees have the power to provide in the lease for an option of purchase by the lessee at a fixed price, (c) Under a power of sale or exchange, the trustees can however make a parti- tion. (<?) Trust to Conversely, a trust to raise money by way of mortgage mortgage will not will not authorize a sale, and the Court will not, in such a authorize case, direct a sale, even though it clearly appears that a sale. sale would be more advantageous, (e) A trust for sale survives, and it is not necessary, Trust for where one trustee has died before a contract has been sale sur- vives. entered into, to go to the Court in order to cany the sale into effect. (/) Trustees Trustees are bound, like other persons, to make a good bound to make good title ; they may of course protect themselves by express title. stipulations, (gi) " It would be prudent before proceeding to the execution of the trust to take the opinion of counsel whether a good title can Counsel's be deduced. Should the contract for sale be unconditional, opinion. and the title prove bad, the purchaser in a suit for specific performance would have his costs against the trustee, though the trustee, where his conduct was excusable, might charge them upon the trust-estate under the head of expenses."(fe) (a) Evans v. Jackson, 8 Sim., 217. for a long time the authority was (5) Hackett v. M'Namara, LI. & G. doubted ; see M' Queen v. Keat- Ves., 467 ; Attorney-General v.

After property has been sold under a power of sale, the trustee

Source page 250

VI.] DUTIES OF TRUSTEES FOR PURCHASE. After property has been sold under a power of sale, the trustee should not let the purchaser into possession until the whole amount of the purchase-money has been paid, (a) The Payment of purchaser is not bound to pay the money to the trustees money, personally ; but payment to an authorised agent of the trustees will bind them, and discharge the purchaser. (6) It sometimes happens that trustees are directed to lay out the trust-funds in the purchase of lands. Such a P"''.^= °^ direction is not very common, and I only propose to deal purchase, with this branch of the law very shortly. The general rule is, that trustees for purchase, like all other trustees, are boimd to discharge the duty prescribed; and failing to do so are answerable for the consequences, as if a specific fund be bequeathed to trustees upon trust to lay out on a purchase, and they neglect to call in the fund and lay it out, they are liable to compensate the cestui que trust for the consequences, (c) Where there is no money in hand, they cannot contract for a purchase, to be completed when money shall be available, for by that time the property may go down in value, (d) The trustees must take care to have the estate valued on their own behalf, and must not be content with the valuation of the vendor, (e) They must see that a good title is shown, and will be justified in taking legal advice.(/) If the trust-estate is in the hands of the Court, the trustees can only contract subject to the approval of the Court, which win direct an inquiry as to whether the purchase is beneficial, and if so, whether a good title can be made.(5') Trustees having a trust or power to purchase must exercise a joint discretion as to the propriety of the purchase, and therefore, as no man can be a judge in his own case, they are precluded from buying from one of them- selves. Ifsuch a purchase be really desirable, it might be carried out by a friendly suit for obtaining the sanction of the Court. (^) The trustees, where the money is not under administration by the Court, need not disclose the trust to the vendor either in the contract or in the conveyance. If they do so, it wiU embarrass the vendor by obliging him to see that the purchase-money is properly applied in pursuance of the trust, (i) (o) Oliver v.

LECTURE VII.

Source page 251

DUTIES AND LIABILITIES OF TRUSTEES. Time within which sale of trust-property to be made — ■ Discretion to be exer- cised — Indian Trusts Act, s. 22 — ■ Conveyance of trust-property to cestui^ que trustent — Distribution of the trust-fund — Derivative title — Payment after death of cestui que trust — Appointment of trustee to assist in distributing — Presumption of death — Rebuttal of presumption — Release — Liability for payment to wrong persons — C!osts — Interest ■ — Bond of indemnity — Authority from cestui que trust to receive the money — Payment on written authority — Payment to persons under dis- ability — Partners — Payment to single trustee — Overpayment : Indian Trusts Act, s. 32 — Refund to executor — Payment when debt from testator subsisting — Liability of trustee for breach of trust — Trustee liable though he has not benefited — Extent of liability — Trustee about to abscond — Criminal breach of trust — Liability of professional adviser — Partner — Loss by accident — Neglect to obey directions in instrument of trust — To pay premiums — Sale to purchaser for valuable consideration without notice — Agent — Barnes v. Addy — • Limitation — Wilful default — Concurrence — Fraud by trustees — By cestui que trust — Acquiescence — Delay — Release and confirmation — No set-off in respect of breach of trust — Liability for breach of trust by predecessor or co-trustees — Trustee joining in receipt for conformity — Indian Trusts Act, s. 26 — • Trustees giving receipt bound to see to investment — Walker v.

kind, has always considered what is for the interest of the parties

Source page 252

177 kind, has always considered what is for the interest of the parties concerned. "(a) I ^ .] _ It is impossible to fix a particular period within which an executor should convert his testator's property, but a reasonable discretion must be allowed to the trustees, and P'^cretion whether they have exercised such a discretion must depend lOcised. DC CXCf"' on the facts. (6) " You cannot," said Sir J. R.{c), " fix one period for selling every species of property. Thus, suppose the testator possessed a large quantity of horses, it would be culpable to keep them at a great expense, incurring necessarily a great outlay for their maintenance, instead of selling them at once. But with respect to other property, there must be a reasonable time allowed for selling it." The usual time is twelve months. ((?) In one case two months were held to be a reasonable time within which to break up a testator's estab- lishment, (e)And where executors sold the stock-in-trade and good-will of a business three weeks after their testator's death, though against the wish of the cestui que trust, and though there was evidence that a better price might have been obtained, they were held not responsible, as they had acted honestly. (/) There is no fixed rule that conversion must take place by the end of the year, but that is the prima facie rule, and executors who do not convert by that time, must show some reason why they did not do so.(5r) But if the trustees have acted honafde, and according to the best of their judgment, and it appears that a sale within twelve months must have resulted in a loss, they will not be liable, (fe) Trustees will, however, be Uable for loss caused by any improper delay, (i) Where trustees delayed selling for twenty-five years, they were held to be liable. (_7) Persons who deal with trustees selling at a considerable distance of time, are under an obligation to enquire and see that no breach of trust is being committed. (A;) And as a reasonable rule, the Court of Appeal recently laid down a period of twenty years from the testator's death. (Z) The rule does (a) Parry v. Buxton, 1 My. & O., Cli., 606 ; Dunning v.

not, however, apply to the sale of leaseholds by executors, (a) A

Source page 253

VII. not, however, apply to the sale of leaseholds by executors, (a) A trust to sell " at such time and in such manner " as the trustees think fit, will not justify the trustees in arbitrarily postponing the sale to an indefinite period, so as to place the tenant-for-life and those in remainder in a totally different relative situation from that in which they would have been, had the sale been made with reasonable diligence. (6) Where property was devised to trustees upon trust with all convenient expedition, and within five years after the testator's death absolutely to sell and convey the premises, it was held, that the trustees could make a good title upon a sale after the expiration of that period. " There is nothing," said Turner, V. C, " in the will importing a negative on a sale being effected by the trustees after the expiration of five years. If there had been a provision negativing any- sale by the trustees after that period, there might have been a sufiicient ground for this Court refusing to interpose to enforce specific performance of the agreement. The question is, whether it is to be collected from the will that the sale, which must at any rate be effected notwithstanding the lapse of the five years, may not after that time be made by the trustees, or whether it must then be made under the direction of the Court of Chancery by the Act of the Court. I cannot impute the latter intention to the testator. ... I think the expression of the will as to the five years is only directory to the trustees, that they might make the payments out of the trust-funds within that time, if possible, "(c) " Where a trustee directed to sell within a specified time extends such time, the burden of proving, as between ArtTlr^*^ himself and the beneficiary, that the latter is not ' ' ' prejudiced by the extension lies ijpon the trustee{d), unless the extension has been authorized by a principal Civil Court of original jurisdiction." Where a testator left money invested in speculative securities, and the executors waited for twelve months, by which time the market had fallen, and they, hoping the market would rise, delayed the sale, and a loss ensued, — it was held, that they ought not to be made liable. " The executors," said James, L.

they thought it more prudent to wait for a rise, and we think they

Source page 254

VII.] CONVEYANCE TO CESTUI QUE TRUST. they thought it more prudent to wait for a rise, and we think they ought not to suffer because it turns out that they committed an •error of judgment. It would be very hard upon executors, who have been saddled with property of this speculative kind and have ■endeavoured to do their duty honestly, if they were to be fixed with a, loss arising from their not having taken what, as it proved by the result, would have been the best course."(a) If a testator gives an absolute discretion to his executors to postpone the sale and conversion of his estate, they are not bound by the ordinary rule to convert the property within a year, even though some of it consists of shares in an unlimited company. And they will not, in the absence of maid fides, be liable for loss arising to the estate from non-conversion. (6) If the instrument creating the trust does not contain any special direction as to sale, it is not usual for the trustees to sell except upon the request of some one or more of their cestuis que trustent, or under circumstances which render a sale necessary or expedient, or unless the property is not of a permanent character, (c) A trust for sale of real estate cannot come to an end, unless all the cestuis que trustent agree to take the property as realty, (d) Where property is settled on trust for sale and when the trustees in their absolute discretion think fit and there is great difficulty in realisation, the court has jurisdiction to sanction an appropriation of the original investments to the shares of the various beneficiaries, including a settled share, although some of the investments appropriated to the settled share are not authorised by the investment clause, (e) When the duties of trustee are at an end, they must convey Conveyance the trust-property to their cestuis que trustent upon its being clearly and satisfactorily proved to them that their duties of trust- cestuis que are at an end, unless they have notice of any disposition or property to trustent. incumbrance made by the cestuis que trustent or any of them.(/) If the cestui que trust is sui juris and absolutely •entitled to the trust-fund the trustees cannot withhold it on the apprehension that he might squander away the fund or otherwise deal improvidently with it.(g) (a) Marsden v. A ), 284 ; Re Tweedie and Miles, 27 Div, 600; Re Chapman (1896), 2 Ch. D., 315 ; Re Douglas and Powells' ^C. Contract (1902), 2 Ch , 296 Tipper, L.